W or ld Cocoa and CBE mar kets Presentation to Global Shea 2013 By Richard Truscott, LMC International, Oxford, UK www.lmc.co.uk
Outline The use of CBEs Chocolate and CBE demand trends Cocoa production Outlook
Background: The use of CBEs Around 90-95% of exported shea is used in the production of cocoa butter equivalents (CBEs). These are used as a replacement for cocoa butter in chocolate and are typically a blend of an exotic fat (shea, sal, illipe, etc) and palm mid-fraction (a product of palm oil). CBEs are used either to: Reduce cost (CBEs are cheaper than cocoa butter); or Improve functionality (i.e. changing the melting point, hardness and reducing bloom). The outlook for shea (and CBEs) is closely linked to trends in the chocolate industry and cocoa market.
Demand for CBEs depends upon: Demand for chocolate confectioner y Legislation (chocolate is one of the few products that has legal definition. This varies between markets) Consumer preferences for products containing CBEs Pr ice
Chocolate product consumption is growing at around 2% per annum. Recession hit demand in 2009. Growth has resumed at a slower pace. There are different trends between emerging and mature markets. 8 7 6 mn tonnes 5 4 3 2 1 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Mature market consumption fell in 2011/12 but demand continued to rise strongly in the emerging markets Asia/Pacific Brazil US C&E Europe W Europe -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% Change in consumption
This trend follows that of recent years, where the emerging markets have led growth consumption growth index (2000/01=100) 160 150 140 130 120 110 100 90 2000/01 2002/03 2004/05 2006/07 2008/09 2010/11 Advanced Emerging
Despite this emerging markets cocoa per capita consumption levels are still low, pointing towards future growth. Mature markets are close to saturation 6 Per capita consumption (kg per annum) 5 4 3 2 1 0 Belgium Switzerland Norway Germany UK Ireland Aust r ia France Denmark Slovenia Australia Finland Greece New Zealand Canada USA Netherlands Sweden Spain Czech Portugal Hungary Poland Italy Russia Slovakia Japan Brazil Romania Chile Colombia Argentina WORLD Malaysia Mexico Ukraine Korea Venezuela South Africa Philippines Turkey Thailand Nigeria Indonesia China India
Income is the key driver of increased consumption (along with a growing middle class and increased urbanisation) Per capita consumption 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Germany Norway UK Slovenia Australia Czech Rep US Russia India Korea China 0 10,000 20,000 30,000 40,000 50,000 60,000 GDP per Capita
The fastest growth is in the BRIC and ASEAN countries. These are also important markets for CBEs. Korea Indonesia India China Brazil Russia 0% 2% 4% 6% 8% 10% Annual growth %
Cocoa consumption in emerging Asian markets has doubled in the last decade. Much of this is compound chocolate, ice cream, cakes, drinks, etc. 350 300 '000 tonnes 250 200 150 100 50 0 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 China India Indonesia Korea Thailand Turkey Other emerging Asia
The growth is largely of cocoa powder based products This is as powder based products are: Cheaper than chocolate Have a lighter taste than chocolate (important for new consumers) Do not melt in hot climates
This points towards higher growth for powder based products in the future Chocolate bars Source: Barry Callebaut Chocolate tablets Ice cream Tobacco Compound Chocolate Flavoured milk drinks 0% 1% 2% 3% 4% 5% 6% 7% Forecast growth
Developed market trends can be seen from German data. Consumption has consistently fallen since 2009 Total Solid Bars Pralines Filled Bars -4.0% -3.5% -3.0% -2.5% -2.0% -1.5% -1.0% -0.5% 0.0% 0.5% Change in Consumption 2009 2010 2011 2012
As demand for powder has increased so have powder prices relative to butter. The relationship between prices is constantly evolving. Butter ratios have risen strongly in the last 6 mths. 3.0 2.5 US ratios 2.0 1.5 1.0 0.5 0.0 Jan- 08 Jul- 08 Jan- 09 Jul- 09 Jan- 10 Jul- 10 Jan- 11 Jul- 11 Jan- 12 Jul- 12 Jan- 13 butter powder
Shea butter prices have remained stable despite continuing fall in cocoa butter prices trade unit value ($ per tonne) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 cocoa beans cocoa butter shea butter cocoa powder
It is cocoa butter prices that determine shea butter prices, not cocoa prices cocoa butter export unit value ($/tonne) 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Note: 2012 trade data not complete. Values calculated from available months trade data 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 3,500 3,000 2,500 2,000 1,500 1,000 500 0 shea butter import unit value ($/tonne) cocoa butter shea butter
Cocoa Production & Price
Cocoa prices rose again in 2012, but have fallen recently 4,000 $ per mt (ICE) and per mt (LIFFE) 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 ICE 2nd Position LIFFE 2nd Position
Côte d Ivoire production has remained strong despite falling from 2010/11 record 1,800 700 Production ('000 tonnes) 1,600 1,400 1,200 1,000 800 600 400 200 600 500 400 300 200 100 Yield (kg/hectare) 0 0 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 production Yield
Fixed price under new reforms has given farmers stability, but many of the long term problems remain unresolved Ageing trees, disease and low fertiliser use mean that yields remain low While the fixed price gives stability, the level is still low compared to other crops e.g. rubber, oil palm Cocoa farming is not attractive to younger generation who prefer to migrate to the city Improved yields key to increasing output. Newly planted hybrids yield 2 or 3 times the average.
Ghana output doubled between 2000/01 and 2010/11. But high inflation means grower price is now less attractive in real terms. 1,200 600 Production ('000 tonnes) 1,000 800 600 400 500 400 300 200 Yield (kg/hectare) 200 100 0 0 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 production Yield
Indonesia still struggling with disease (CPB and VSD) and competition from other crops. Brazil and Ecuador have increased output. 600 500 400 '000 mt 300 200 100 0 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 Indonesia Ecuador Brazil
Cocoa supply/demand summary 2012/13 return to deficit after two surpluses Longer term supply remains vulnerable and increased production will rely on increasing yields Stock levels estimated at a minimum of around 1.9 mn mt Stock/Grind ratio 47% in 2012/13
The stock grind ratio is the key determinant of cocoa prices 8,000 7,000 6,000 Real price 5,000 4,000 3,000 2,000 1,000 1999/2000-2011/12 0 10% 20% 30% 40% 50% 60% 70% 80% 90% Stock:consumption ratio
CBE outlook: Little change in EU despite legislative changes No real prospects of legislative change in US Strong growth in the emerging markets. Developments in cocoa butter prices are key.
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