Farmers, industry sign MOU on cocoa

Farmers, industry sign MOU on cocoa

Zakki P. Hakim, The Jakarta Post, Jakarta

The Association of Cacao Farmers and the Association of
Indonesian Cacao Industry (AIKI) signed a memorandum of
understanding (MOU) on Wednesday in a bid to boost national
production, which currently is only running about half of its
total capacity.

AIKI chairman Piter Jasman said the cocoa products processors
expected the government-facilitated MOU to eventually help local
cacao processing factories to run at full capacity within two
years.

The MOU obliges the factories to buy 15 tons of unfermented
cacao beans at Rp 12,200 (US$1.29) per kilogram and 15 tons of
fermented beans at Rp 13,600 per kg as an initial step.

The Rp 1,400 margin is expected to serve as an incentive to
encourage farmers to process their commodities before selling
them.

Local cacao factories have been processing just half of their
310,000-ton total capacity due to a scarcity of fermented cacao
beans in the country, Piter said.

Factories need fermented cacao beans to produce better quality
cocoa powder, liquor and cocoa butter, but farmers tend to sell
unfermented beans to exporters as they need to sell them fast and
apparently do not have good networks with local manufacturers, he
explained.

Domestic farmers only ferment about 10 percent total cacao
beans, thus allowing exporters to buy from farmers at lower
prices.

Chairman of the cacao farmers association Central Sulawesi
chapter Ahwan Ahmad said in reality, exporters could buy for as
low as Rp 9,000 per kilogram instead of the global market price
of about Rp 12,000.

"Exporters and traders don't care whether the bean has been
fermented or not, they just mix them and buy them at a lower
price. While the farmers have less bargaining power, as they want
to sell fast," he said.

Ahwan added that farmers could get better prices if they had
their cacao beans fermented.

The MOU sets out Rp 13,600/kg as the starting price, he said,
adding that the fermented beans price could reach at least Rp
15,000 per kg.

To process fermented cacao beans, farmers only need five days.
But Ahwan said the farmers needed the government's help to
promote effective methods and benefits of fermenting the beans.

According to the Association of Indonesian Cacao Exporters
(Askindo), the country's farmers produced an estimated 400,000
tons of cacao beans last year, but exported up to 277,000 tons,
mostly to Malaysia.

Ministry of Industry's director for agro-based businesses,
Yamin Rachman said the MOU was expected to push farmers to double
the total amount of fermented cacao beans this year.

He said the government was working to permanently remove a 10
percent value added tax (VAT) imposed on processed cacao beans to
further encourage farmers to ferment.

The MOU was also signed by other associations, including the
Association of Indonesian Cacao Farmers (APKAI) and the
Association of Indonesian Cacao and Chocolate Industry Players
(APIKCI).

Indonesia is the third largest cacao exporter after the Ivory
Coast and Ghana as a result of its 900,000 hectares of cacao
plantation areas. Its cocoa accounts for 11 percent of global
demand which stands at three million tons per year.

In 2002, Indonesia's cocoa output reached its peak production
of 433,411 tons.

But the country still imports fermented cacao beans, mostly
from Ghana, and a significant amount of Malaysian cocoa products,
which, ironically, were made from Indonesia-grown beans.

Indonesia was Malaysia's largest importer of cocoa powder
(containing added sugar or other sweeteners) last year,
accounting for almost 60 percent of the neighboring country's
total export of the commodity.

Indonesia was also the second largest importer of Malaysian
chocolate.