May 16, 2014 / 3:30 PM / 4 years ago

Cocoa trader Olam to build 1st Asian plant in bet on chocolate demand

NEW YORK, May 16 (Reuters) - Olam International Ltd , one of the world’s major cocoa traders, said on Friday it plans to invest $61 million to build a cocoa-processing plant in Indonesia, its first in Asia, where chocolate demand is soaring.

The renewed push into cocoa comes just two months after Singapore sovereign wealth fund Temasek agreed to take over Olam, the Asia-based agribusiness group, revitalizing its weak balance sheet after a tumultuous 18 months.

The plant, Olam’s fifth cocoa facility, will have initial annual grinding capacity of 60,000 tonnes, producing cocoa butter, cake and high-quality powders from beans grown in Indonesia and west Africa, the company said in a statement.

Olam is following other commodity giants, which have built grinding operations in Indonesia, the world’s third biggest cocoa producer, after the government introduced a bean export tax.

On Friday, Cargill, Olam’s bigger rival, commissioned a 70,000-tonne processing plant in Gresik, Indonesia, with commercial production starting in the third quarter.

The wave of investments has raised concerns about a shortfall in bean supplies in the country as grinding capacity doubles in the production of butter and powder used in chocolate cookies and treats.

Olam’s move to grow organically also comes as a flurry of deal-making transforms the niche softs market landscape. In March, COFCO, China’s state-backed trader, bought a major stake in Noble Group Ltd’s agriculture business.

Last month, Archer Daniels Midland Co ditched plans to sell its large cocoa-processing business after long-running negotiations to sell the operations collapsed.

Olam, which buys about 500,000 tonnes of cocoa annually, also has a cocoa plant in Ivory Coast, the world’s biggest cocoa producer, with capacity expected to reach 75,000 tonnes.

It also has grinding capacity of 15,000 tonnes in a leased facility in Nigeria. It processes cocoa butter and cocoa butter equivalents in the United Kingdom, and cocoa powder in Spain. (Reporting by Marcy Nicholson; Editing by Jeffrey Benkoe)

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