* Industry group targets 1.5 million T output by 2020
* Disease has hurt Indonesia cocoa production for years
* Farmers need better prices to stop then switching crops
By Michael Taylor
JAKARTA, April 8 Some of the biggest names in
the cocoa industry are chalking out an ambitious roadmap for
Indonesia to triple output of the bean by 2020, as they push the
world's third biggest producer of the commodity to capitalise on
rising demand for chocolate.
Disease and adverse weather have hampered supplies for years
in Indonesia, where smallholders own about 95 percent of cocoa
plantations and the government is struggling to revive the
industry through a $350-million programme.
Members of the Cocoa Sustainability Partnership (CSP), which
aims to boost cocoa development in Indonesia, met on March 26 to
study ways to improve crop farming and yields and lift output to
1.5 million tonnes by 2020, group chairman Ruud Engbers said.
"There hasn't been a roadmap in the past with so many
parties involved and aligned, and with so much commitment from
the industry and donors to make it happen," he told Reuters.
"The momentum and the need is there to make it work now,"
added Engbers, who also heads Mars Symbioscience Indonesia, a
unit of privately owned chocolate giant Mars Inc.
The 22 members of the group, launched in 2006, include U.S.
agribusiness giant Cargill Inc, Singapore-based Petra
Foods and Olam International Ltd, soft commodity giant
Armajaro Trading Ltd and industry body the Indonesian Cocoa
If output lags production, global cocoa prices could more
than double by 2020, rallying to a level last seen 36 years ago,
an official at Petra Foods has estimated.
Petra was the world's third largest supplier of cocoa
ingredients before it sold the cocoa business to Swiss chocolate
maker Barry Callebaut late last year.
Cocoa demand is forecast to exceed production by 45,000
tonnes in the season to September 2013, helped by economic
growth and changing tastes in emerging markets such as Indonesia
and China, the International Cocoa Organization (ICCO), a
grouping of consumer and producer nations, has said.
From the year 2009/2010 until 2012/2013 cocoa bean grindings
in Indonesia are seen soaring 119 percent to 285,000 tonnes,
ICCO data show, while in China a rise of 91 percent to 42,000
tonnes in estimated in the same period.
The Indonesian Cocoa Association estimates cocoa output will
rise as much as 11 percent in 2013 to 450,000 to 500,000 tonnes
in Indonesia, home to around 1.5 million to 1.6 million hectares
of cocoa plantations.
But improving cocoa output in Indonesia, which lags Ivory
Coast and Ghana, will not be easy, analysts say.
"A concerted effort like that is definitely the best way to
go about it," said Keith Flury, a senior soft commodities
analyst with Rabobank, referring to the programme unveiled by
the Cocoa Sustainability Programme.
"You can get partnerships together but there instantly needs
to be a strategic outlook that is going to have to support
farmers and production," added Flury, who sees Indonesian output
at 435,000 tonnes in 2012/2013.
With global prices trading near multi-month lows, farmers'
key concern was to get better rates for their produce, he said.
Indonesia should consider removing a levy on exports, Flury
said, and industry should consider paying the smallholders more.
"The only variable there for me is price. Do any of these
guys down the supply chain feel like paying more?" Flury said.
"It is a question they need to answer."
Better prices would also keep farmers from switching to
crops such as palm oil and coffee that are less cost-intensive,
CONSULTANT TO PREPARE ROAD MAP
Engbers said other key global commodity firms were joining
"We agreed to hire a consultant to work out the roadmap, to
be finished this year," he said. "There is more and more
high-level consensus on the fact that we need to work more
closely together and strengthen the cocoa supply chain."
A task force drawn from government researchers, industry,
certification bodies and non-government and farmer groups will
manage the drive to ensure better use of resources, he added.
Indonesia's main crop harvest usually starts in April and
peaks in July and August, before a smaller harvest, known as the
mid-crop, begins in October or November.
CSP members will discuss progress at a quarterly meeting on
June 24 in Makassar, the capital of South Sulawesi. More than
half of Indonesia's cocoa is grown on Sulawesi island.