Download - Lmc shea 2013 - updated march 3
World Cocoa and CBE markets
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 chocolate confectionery • Legislation (chocolate is one of the few products that
has legal definition. This varies between markets) • Consumer preferences for products containing CBEs • Price
Demand for CBEs depends upon:
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.
0
1
2
3
4
5
6
7
8
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
mn
tonn
es
Mature market consumption fell in 2011/12 but demand continued to rise strongly in the emerging markets
-3% -2% -1% 0% 1% 2% 3% 4% 5% 6%
W Europe
C&E Europe
US
Brazil
Asia/Pacific
Change in consumption
This trend follows that of recent years, where the emerging markets have led growth
90
100
110
120
130
140
150
160
2000/01 2002/03 2004/05 2006/07 2008/09 2010/11
cons
umpt
ion
grow
th in
dex
(200
0/01
=100
)
Advanced Emerging
Despite this emerging markets cocoa per capita consumption levels are still low, pointing towards future growth. Mature markets are close to saturation
0
1
2
3
4
5
6
IndiaChinaIndonesiaN
igeriaThailandTurkeyPhilippinesSouth AfricaVenezuelaKoreaU
kraineM
exicoM
alaysiaW
ORLD
ArgentinaColom
biaChileRom
aniaBrazilJapanSlovakiaRussiaItalyPolandH
ungaryPortugalCzechSpainSw
edenN
etherlandsU
SACanadaN
ew Zealand
Greece
FinlandAustraliaSloveniaD
enmark
FranceU
KIrelandAustriaG
ermany
Norw
aySw
itzerlandBelgium
Per c
apita
cons
umpt
ion
(kg
per a
nnum
)
Income is the key driver of increased consumption (along with a growing middle class and increased urbanisation)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
0 10,000 20,000 30,000 40,000 50,000 60,000
GDP per Capita
Per c
apita
cons
umpt
ion
IndiaRussia
Norway
Korea
Germany
Czech Rep
UK
US
Slovenia
China
Australia
The fastest growth is in the BRIC and ASEAN countries. These are also important markets for CBEs.
0% 2% 4% 6% 8% 10%
Russia
Brazil
China
India
Indonesia
Korea
Annual growth %
0
50
100
150
200
250
300
350
2001/0
2
2002/0
3
2003/0
4
2004/0
5
2005/0
6
2006/0
7
2007/0
8
2008/0
9
2009/1
0
2010/1
1
2011/1
2
'000
tonn
es
China India Indonesia Korea Thailand Turkey Other emerging Asia
Cocoa consumption in emerging Asian markets has doubled in the last decade. Much of this is compound chocolate, ice cream, cakes, drinks, etc.
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
0% 1% 2% 3% 4% 5% 6% 7%
Flavoured milkdrinks
CompoundChocolate
Tobacco
Ice cream
Chocolate tablets
Chocolate bars
Forecast growth
This points towards higher growth for powder based products in the future
Source: Barry Callebaut
Developed market trends can be seen from German data. Consumption has consistently fallen since 2009
-4.0% -3.5% -3.0% -2.5% -2.0% -1.5% -1.0% -0.5% 0.0% 0.5%
Filled Bars
Pralines
Solid Bars
Total
Change in Consumption2009 2010 2011 2012
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
butter powder
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.
US ratios
Shea butter prices have remained stable despite continuing fall in cocoa butter prices
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
trad
e un
it va
lue
($ p
er to
nne)
cocoa beans cocoa butter shea butter cocoa powder
It is cocoa butter prices that determine shea butter prices, not cocoa prices
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
coco
a bu
tter
exp
ort u
nit v
alue
($/to
nne)
0
500
1,000
1,500
2,000
2,500
3,000
3,500 shea butter import unit value ($/tonne)
cocoa butter shea butter
Note: 2012 trade data not complete. Values calculated from available months trade data
• Cocoa Production & Price
Cocoa prices rose again in 2012, but have fallen recently
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$ pe
r mt (
ICE)
and
£ p
er m
t (LI
FFE)
ICE 2nd Position LIFFE 2nd Position
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2000/0
1
2001/0
2
2002/0
3
2003/0
4
2004/0
5
2005/0
6
2006/0
7
2007/0
8
2008/0
9
2009/1
0
2010/1
1
2011/1
2
2012/1
3
Prod
uctio
n ('0
00 to
nnes
)
0
100
200
300
400
500
600
700
Yield (kg/hectare)
production Yield
Côte d’Ivoire production has remained strong despite falling from 2010/11 record
• 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.
Fixed price under new reforms has given farmers stability, but many of the long term problems remain unresolved…
Ghana output doubled between 2000/01 and 2010/11. But high inflation means grower price is now less attractive in real terms.
0
200
400
600
800
1,000
1,200
2000/0
1
2001/0
2
2002/0
3
2003/0
4
2004/0
5
2005/0
6
2006/0
7
2007/0
8
2008/0
9
2009/1
0
2010/1
1
2011/1
2
2012/1
3
Prod
uctio
n ('0
00 to
nnes
)
0
100
200
300
400
500
600
Yield (kg/hectare)
production Yield
Indonesia still struggling with disease (CPB and VSD) and competition from other crops. Brazil and Ecuador have increased output.
0
100
200
300
400
500
600
2000/0
1
2001/0
2
2002/0
3
2003/0
4
2004/0
5
2005/0
6
2006/0
7
2007/0
8
2008/0
9
2009/1
0
2010/1
1
2011/1
2
2012/1
3
'000
mt
Indonesia Ecuador Brazil
• 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
Cocoa supply/demand summary
The stock grind ratio is the key determinant of cocoa prices
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
10% 20% 30% 40% 50% 60% 70% 80% 90%
Stock:consumption ratio
Real
pric
e
1999/2000 - 2011/12
• 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.
CBE outlook:
Thank You www.lmc.co.uk