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.