OREANDA-NEWS. February 19, 2015. Asia's cocoa butter ratios sank further this week, still at their lowest in 21 months as weak demand for butter and powder continued, with grinders expecting sluggish demand through the first quarter.

The global cocoa market has been hit by high bean prices and changing economic conditions that are affecting chocolate demand in top consumers Europe and the United States. Meanwhile, excess stocks of cocoa powder and butter in Asia have helped push prices lower, thinning margins to below cost for some grinders.

"Grinders expect the first quarter to be weak," one trader said, noting that they were now fully stocked for the first quarter and cautiously shopping for beans for the second.

When ground, cocoa beans yield roughly equal parts butter, which gives chocolate its melt-in-the-mouth texture, and powder used in cakes, biscuits and drinks. Grinders do not disclose the size of their butter or powder stocks.

Butter ratios, a key indicator of demand, were quoted at 1.88-2.0 times London futures, down from between 1.95 and 2.0 two weeks ago, and their lowest since April 2013. Powder, meanwhile, climbed slightly to between \\$1,800 and \\$2,200 a tonne from \\$1,800-\\$2,100 per tonne two weeks ago.

London cocoa futures rose by more than 13 percent in 2014 boosted partly by forecasts that production may fall this season in Ivory Coast and Ghana, the world's top two growers.

Now the higher cocoa prices are leading chocolate makers to consider re-formulating products.

"There's still room for Asia to grow, but Asians aren't eating as much chocolate as Europeans," a Southeast Asia-based cocoa grinder told Reuters referring to demand this year.

"The hope is for US demand (to improve) now, with the US economy getting better compared to everyone else." Indonesian cocoa growers are falling short of grinders' demands, according to Dakhri Sanusi, a senior member of the Indonesian Cocoa Association (ASKINDO).

Cocoa processing in Asia dropped to its weakest level in at least three years in the fourth quarter of 2014.

"The quality is also not at a level requested by (grinders). Between domestic (grinders) and supply we still need more than what is available," Sanusi told Reuters.

Indonesia, the world's third-biggest cocoa bean producer has put in place a \\$95-million programme to help double its output.

However, the impact of these programmes, that include grafting and replanting schemes to replace older trees, may not yield results for at least 12 months, Sanusi said.