El Nino effect to disrupt cocoa production in 1998

El Nino effect to disrupt cocoa production in 1998

By Sylvia Gratia M.N.

JAKARTA (JP): A dry spell, believed to have been triggered by
the El Nino weather pattern, has hit Indonesian cocoa plantations
and may disrupt production of next year's crop.

Executive director of the Indonesian Cocoa Association, P.S
Siswoputranto told The Jakarta Post that Indonesia's cocoa
production is expected to fall by 10 percent in the 1997/1998
cocoa year -- from Oct. 1 to Sept. 30 -- due to the El Nio
weather pattern and the long drought.

"We estimate output to be about 283,000 tons for the 1997/1998
period or down about 10 percent of its initial target of 315,000
tons," Siswoputranto told the Post.

El Nino, named after the Christ child by Peruvian fishermen,
describes the unusually warm Pacific Ocean temperatures off the
coast of South America, which occurs every two to seven years. It
normally peaks around December and can affect weather patterns
worldwide.

But this year, the phenomenon arrived early and nearly
matched the century's worst disaster in 1982/1983, which blighted
crops in Indonesia, Australia, the Philippines and southern
Africa after a blistering drought.

Indonesia is currently the world's third largest cocoa
producer after the Ivory Coast and Ghana with an output of
295,000 tons of cocoa beans in 1995/1996, or about 10 percent of
the world's supply.

The association's data shows that of the 295,000 tons of cocoa
produced last year, about 210,000 tons were produced by small
holders, 44,000 tons by state plantations and 33,000 tons by
private estates.

Siswoputranto said 1998/1999 production remained under a cloud
due to a severe drought linked to the phenomenon sweeping across
the Indonesian archipelago.

"I see production declining about 10 percent next year, if
there isn't much rain over the next two months," he said adding
there was also a possibility that next year's harvest would be
delayed.

He said the decline in production had led to a 10 percent
decline in export volume.

Indonesia's exports dropped to about 240,000 tons this year,
he said.

Last calendar year, Indonesia exported about 274,000 tons of
cocoa worth US$262.84 million. About 95,962 tons were exported to
Singapore, followed by the United States with 85,653 tons.

According to the association's data, the country exported
about 139,950 tons from January to July this year worth $348.34
million.

The United States was the largest importer, with about 59,427
tons worth $99.92 million, while Singapore imported about 45,972
tons valued at $44.85 million.

Indonesia exported about 112,346 tons of cocoa beans, 4,844
tons of cocoa paste, 7,553 tons of cocoa powder and 15,206 tons
of cocoa butter in the January-July period this year.

The country exports its cocoa beans to 20 countries, including
the United States, Germany, the United Kingdom, other European
countries, Singapore, Thailand, Malaysia and China.

Cocoa products are exported to North America, Europe, Japan,
Hong Kong, Sri Lanka, Nigeria, Russia and Poland.

Siswoputranto said Indonesia processed some of its cocoa beans
to support the local chocolate industry, which needs about 65,000
tons annually.

Prices

He said this year, cocoa prices had increased due to the
scarcity of supply and weaker currencies.

"There is a deficit of about 147,000 tons in the world market
in 1996/1997, because world production only reached 2,695,000
tons while demand for grinders reached 2,815,000 tons," he said.

He said cocoa prices on the world market surged to a nine and
a half year high in October, driven by nagging fears the world's
biggest cocoa crop in the Ivory Coast could be damaged by the El
Nino effect, causing the expected global cocoa deficit to more
than double to 450,000 tons.

"Demand is rising by 2 to 3 percent per year. With the
structural supply deficit, prices are going to rise anyway," he
said adding that cocoa prices in the world market would continue
to increase in the next few years due to the scarcity of supply.

He added that cocoa prices in the local market have also been
kept high by the sharp decline of the rupiah against the American
greenback.

The rupiah has been hit by speculative attacks since early
July, losing more than 50 percent of its value against the U.S
dollar.

He said fair, average quality beans (FAQ) were quoted at
between Rp 5,000 and Rp 5,250 per kilogram in Ujungpandang, South
Sulawesi.

"Sulawesi's cocoa farmers follow the price increase in the
world market because they received price information from
Malaysian and Filipino traders who are faster than Javanese
farmers," he said.

But he said the increase in the cocoa price in the local
market may drive farmers to sell poor quality cocoa and
unfermented cocoa.

"The farmers may be unwilling to ferment their cocoa beans to
avoid the additional costs because the price of unfermented cocoa
is high," he said adding that the price of unfermented beans was
between $100 and $200 a ton cheaper.

"European countries have set their own standards of quality
for the beans, one of which is that the bean is fermented," he
said.

But some markets such as the United States, prefer unfermented
beans, which makes it difficult for the association to encourage
cocoa producers to ferment their beans, he added.

More than 60 percent of Indonesia's cocoa output is from South
Sulawesi. Last year, about 155,000 tons of the 274,000 tons of
the cocoa Indonesia exported came from the province.

Quarantine

Siswoputranto said that Indonesian cocoa exporters were likely
to look for other market areas like Europe where demand for cocoa
was high and the rules were less strict than the United States if
the country did not lift its tight inspection of Indonesian
cocoa.

He said that the U.S. Food and Drug Administration had been
imposing a policy since 1992 to automatically quarantine cocoa
imported from Indonesia, Brazil and Malaysia for pest and disease
control.

He said the policy had caused a great loss to Indonesian
exporters since they had to pay for the storage during the
examination process, which could take days or weeks, and a fee
for the examination.

He said that Indonesia was the only country still facing the
restriction as Brazil stopped exporting to the U.S. due to a
shortfall in domestic output while Malaysia also stopped
exporting cocoa because it had converted many cocoa plantations
into other commodities such as rubber and palm oil.

He said that the insects in Indonesia's cocoa exports was
partly because the exporters put the cocoa in used bags.

He said the association, in cooperation with the Ministry of
Agriculture, had promoted the use of new bags in exporting cocoa,
but some exporters said used bags were still allowed to export
their cocoa.

"The Ministry of Agriculture has to be firmer to forbid the
use of used bags," he said adding that shipment of cocoa to the
U.S. took 40 days, enough time for the cocoa to be infested with
pests on the ship during the trip.

Table: Indonesia's cocoa production, 1987/1988-1997/1998

Cocoa Year Production (tons)

----------------------------------

1987/1988 58,000

1988/1989 93,000

1989/1990 115,000

1990/1991 150,000

1991/1992 180,000

1992/1993 240,000

1993/1994 260,000

1994/1995 240,000

1995/1996 285,000

1996/1997 310,000

1997/1998* 283,000