An Update on Indonesia’s Cocoa Bean Production & Export
Indonesia’s cocoa bean production is expected to range between 500,000 and 700,000 tons in 2015 according to the Indonesian Cocoa Industry Association (AIKI), up from an estimated 485,000 tons in 2014. Earlier, the Indonesian government pledged to launch a USD $95 million cocoa revitalization program in the second quarter of 2015 in an ambitious attempt to double the nation’s cocoa output within a two year period. Indonesia’s Agriculture Ministry targets domestic cocoa bean output of at least one million tons per year.
Indonesia is currently the world’s third-largest cocoa bean grower. However, in recent years the country’s cocoa production growth has been limited, or even declined. This poor performance is due to the fact that 90 percent of Indonesia’s cocoa output is produced by smallholders. These farmers lack the financial resources to enhance trees’ productivity, hence resulting in ageing cocoa trees that are less productive and vulnerable to diseases and floods. Moreover, promising perspectives of palm oil and rubber made some Indonesian farmers decide to shift towards those commodities in recent years. Furthermore, dry weather also managed to curb cocoa bean output in 2014.
Pieter Jasman, General Chairman of AIKI, emphasized the importance for Indonesia of becoming self-sufficient in cocoa bean output. In 2014, Indonesia still needed to import an estimated 50,000 tons of cocoa beans to meet the domestic industry’s demand. The new government program, which will focus on improving irrigation, seeds, fertilizers and machinery, should therefore turn Indonesia into a self-sufficient cocoa producer. By 2020, the government would like to see Indonesia become the world’s largest cocoa supplier, thus surpassing Ivory Coast.
However, Indonesia’s previous program was unsuccessful. In 2009 the government started a five-year cocoa revitalization program to boost production through intensification, rehabilitation and rejuvenation activities as Indonesia’s cocoa productivity per hectare had been lagging behind that of other cocoa-producing countries causing that domestic cocoa grinders are currently running at half their 550,000 tons capacity.
In mid-December 2014, top commodities trader Cargill Inc opened its USD $100 million cocoa processing plant in East Java due to positive future forecasts regarding worldwide chocolate consumption as well as the beans’ growing opportunities in Indonesia. Cargill’s cocoa plant will have an initial capacity of 70,000 tons per year and most of the cocoa will be supplied by farmers in Sulawesi, Indonesia’s most important cocoa growing region. Also other multinational firms, such as Olam International Ltd and Barry Callebaut, have built new facilities in Indonesia, evidencing future prospects of the commodity.
International cocoa prices may rise in 2015 as global supply cannot satisfy global demand yet. Moreover, the global cocoa supply is vulnerable as about 60 percent of this total supply originates from Ivory Coast and Ghana, implying that local turmoil has an immediate and large effect on global cocoa prices. For example, in the summer of 2014 the cocoa price rose over ten percent after the market started to worry about the possibility that the Ebola virus would spread to these two African countries.