JAKARTA (Reuters) - A $350-million campaign to boost cocoa yields in Indonesia, the world’s third largest producer of the chocolate ingredient, is turning sour as re-planted trees are still prone to disease, have poor roots and have been producing beans of poor quality.
Here are some facts on Indonesia’s cocoa industry:
Indonesia has around 1.5 million to 1.6 million hectares of cocoa plantations, double the 2000 figure of 749,917 hectares, industry and agriculture ministry data shows. About 65 percent are on Sulawesi island with 15 percent on the island of Sumatra, while the rest are on the islands of Java, Bali, Kalimantan, Maluku and Papua.
Smallholders own about 95 percent of the total plantation area, with the rest held by state-owned and private plantation firms.
Indonesia’s bean exports in 2012 will be 150,000 tonnes, down 29 percent from 210,000 tonnes last year because of rising domestic grinding capacity. Nearly half its cocoa bean exports go to Malaysia, with the United States also a top buyer.
Indonesian grinders also import high-quality fermented African cocoa beans to blend with Indonesian beans and improve flavor and color when producing cocoa powder, which is used to make biscuits and chocolate drinks.
Indonesia’s African bean import volumes vary, depending on local bean production and grinding, but range between 20,000 and 31,000 tonnes a year. This may rise above 100,000 tonnes in 2013.
Indonesia has been struggling to increase production because its ageing cocoa trees, most of them planted in the 1980s, are vulnerable to disease that is hard to stamp out because of the vast network of smallholders.
Many are individual farmers who own less than a hectare of land and use poor farming techniques. With low cocoa prices, farmers may not have enough money to buy fertilizer or pesticide for their crop.
Indonesia’s cocoa output this year is estimated to be little changed between 435,000 and 450,000 tonnes from last year’s 435,000 tonnes, the industry estimates, as dry weather and disease curb output.
Farmers have also been battling the pod borer, a worm-like creature that eats cocoa beans and became a menace in 1999. the disease Vascular Streak Dieback, which attacks leaves, branches and tree trunks, returned to key cocoa-growing areas of Sulawesi in 2008.
Poor farming techniques and the spread of disease have cut productivity to about 660 kg per hectare/year from 1.1 tonnes over the past 5 years. Cocoa output hit a record 621,873 tonnes in 2006 but has since failed to exceed 600,000 tonnes.
Indonesian beans are known for their poor quality, because they are small, leave a lot of waste and fetch a low price, partly because they are not fermented, and so need to be blended with imported beans to produce cocoa powder.
Small farmers, many living hand-to-mouth, would rather get immediate cash for their crop than wait to ferment beans.
In 2009, the government launched a $350 million program to boost cocoa output to 600,000 tonnes per year by 2013. It distributed free fertilizer to boost productivity of cocoa trees over 145,000 hectares, and produce better seeds and trees.
The program covers tree rejuvenation over 235,000 hectares by side-grafting, or the removal of non-productive branches, followed by the insertion of young branches from other trees that are more productive and resistant to diseases and pests.
About 70,000 hectares of cocoa plantation, which were badly damaged, are also being replanted with new trees.
An independent survey in July said many newly planted trees had died, with many farmers now switching to oil palm cultivation instead.
Chocolate consumption in Indonesia has scope to grow, with annual cocoa demand estimated at just 0.2 kg per person, against 0.6 kg in neighbor Malaysia and 10 kg in Europe.
To boost domestic grinding capacity, Indonesia launched a monthly export tax for cocoa beans of up to 15 percent in April 2010. The tax is decided by the government every month based on export prices.
Key cocoa grinders are PT General Food Industries, a unit of Singapore-based Petra Foods Limited; privately-owned PT Bumi Tangerang; PT Effem Indonesia, a unit of privately-owned Mars, which produces Mars bars and Snickers; and publicly listed PT Davomas Abadi Tbk.
Malaysia’s Guan Chong has set up a new cocoa grinder with maximum capacity of 150,000 tonnes on Batam island of Sumatra.
The country is also attracting companies such as U.S. agribusiness giant Cargill and Barry Callebaut, the world’s top chocolate maker, which plan to invest almost $150 million in cocoa grinding plants.
Indonesia’s annual cocoa grinding capacity is about 350,000 tonnes this year, and is likely to rise above 600,000 tonnes next year as the country expands its grinding sector.
Last year, 20,000 tonnes of cocoa beans were imported from Africa for blending, a figure set to surpass 100,000 tonnes in 2013.
Sources: ICCO, Indonesia Cocoa Industry Association, ASKINDO, the State Statistic Agency (BPS), Mintel
Reporting by Michael Taylor; Editing by Clarence Fernandez