Singapore, June 8 - Asian cocoa grinders are struggling to get good quality beans, even though supplies have slowly improved in Indonesia's main growing island of Sulawesi after a delayed harvest, dealers said on Friday.
In the product market, butter ratios were steady at 2.60 to 2.61 times London futures for nearby shipments. The price of butter, a key ingredient for chocolate, is determined by multiplying the ratio with related contracts in London.
"A lot of grinders might have waited for the main crop to start, hoping to get better quality beans. Now that the crop has been delayed, it's difficult to get good beans unless they are prepared to pay a very high price," said a dealer in Singapore.
"People are using the beans to meet whatever previous requirements. Bean stocks are declining while there are always regular purchases of butter," he said.
Grinders in Malaysia, Singapore, China and Europe buy beans from Indonesia, the world's third-largest cocoa producer after Ivory Coast and Ghana.
Daily arrivals of beans from plantations to the main export port of Makassar in South Sulawesi rose to 1,500 tonnes this week from 1,000 tonnes last week but good beans are difficult to find.
Incessant rains earlier this year delayed harvests in Sulawesi to May from April, causing cocoa pods to turn black and mouldy and the beans in them to shrink.
"We've been offered beans at a discount of $100 under New York. That's very expensive," said a grinder in Malaysia, which is Asia's largest grinder.
The discount was also heard at $110 under New York's July contract but it was even smaller than last week's $180 on a free-on-board basis, reflecting difficulties in getting good quality beans.
The New York Board of Trade benchmark July contract dropped $30 to $1,845 a tonne on Thursday in technically driven trade.
"We have to slow down and we don't dare to sell too much product. It's even difficult to get beans from our own estates because of poor harvesting," said the grinder in Malaysia.
Malaysia also grows cocoa but production is not enough to meet demand from local grinders. Production has declined in recent years mainly because of poor weather and the shift to oil palm, whose prices reach record-highs this year.
"The harvest is about to end and it's not going to be good. There's a pod borer outbreak and the beans are flat," said a dealer in Tawau, a main growing district in the state of Sabah on Borneo.
The worm-like pod borer eats cocoa beans. The harvests started in Tawau in April. The next crop is expected to start in in October.
Malaysia expects annual grinding capacity to rise 33 percent to 360,000 tonnes by 2010 from 270,261 tonnes last year, the commodities minister, Peter Chin, said in March.
The country expects cocoa production to rise around 5 percent in 2007 from an estimated 30,000 tonnes in 2006 by teaching small growers better farming practices and increasing the area planted with the crop.