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Chocolate Demand Recovery Expected to Drive Another Jump in Cocoa Processing

Chocolate Demand Recovery Expected to Drive Another Jump in Cocoa Processing

Cocoa processing in Europe and North America probably climbed further in the fourth quarter, indicating stronger chocolate demand as economies continue to recover from the pandemic, Bloomberg surveys show.

Data this week is expected to show grindings climbed 6% in Europe and 4.6% in North America from a year earlier, according to eight analysts surveyed by Bloomberg. The figures, which show the amount of beans turned into butter and powder used in confectionery, can give an indication of how consumption is faring, and had been hit in 2020 as lockdowns hurt demand.

There are already signs the market is improving. Asian data released on Friday showed the region’s processing climbed more than expected last quarter, while chocolate companies Lindt & Spruengli AG and Hotel Chocolat Group Plc this week reported robust sales. Cocoa futures have also got off to a good start to the year and are near a three-month high in New York. 

“When you consider the relatively poor Q4 2020 against which we are comparing, the number should be strong,” said Jonathan Parkman, co-head of agriculture at Marex in London. “I don’t think figures will be quite as strong as the third-quarter grind, but I don’t think it will be massively different.”

Chocolate Demand Recovery Expected to Drive Another Jump in Cocoa Processing

While figures for last quarter are expected to show stronger cocoa processing, there are still risks to demand for the coming year. Consumers are being hit by faster inflation that’s squeezing household budgets, and economies are still battling coronavirus outbreaks.

“The consumer is going to go through a hell of a squeeze and that’s not just in the U.K. -- they’re not going to be as well off in 2022 as they were in 2021,” Parkman said.

The European Cocoa Association will release grindings data on Wednesday, with North American figures from the National Confectioners Association due a day later. The following is a breakdown of estimates, with midpoints used for forecasts given as a range:

RegionQ4 median estimateRange
Europe6%3%-8%
North America4.6%2%-7.6%

©2022 Bloomberg L.P.