KL cocoa traders and grinders to work out price pact

KL cocoa traders and grinders to work out price pact

KUALA LUMPUR (Reuter): Malaysian cocoa traders and grinders are to hold talks before the end of August on a price pact that could favor both sides and ensure enough cocoa beans for local use, a senior industry official said yesterday.

"One of the things grinders are saying now is that they can't get local beans as traders prefer to export them at a higher price," Mohamed Musa Jamil, deputy director-general of the state- controlled Malaysian Cocoa Board (MCB), told Reuters.

"We are hoping to get both sides together before our next board meeting at the end of August so they can work out some formula," he said in a telephone interview from Kota Kinabalu, capital of the east Malaysian state of Sabah.

Sabah, located on Borneo Island, grows more than 80 percent of Malaysia's cocoa, with the bulk of the crop cultivated in Tawau, a district on the northeast of the island.

Mohamed Musa said he had no idea how the new price mechanism would work but added that it would not invalidate daily prices quoted by the MCB.

"Our prices are based on the London terminal market. The traders and grinders pact will most likely be a compromise pact," he said.

Beans from Tawau were quoted at an average of between 3,085 and 3,125 ringgit a ton (us$1,234 and $1,250) by the MCB on Thursday, from between 3,212 and 3,254 ringgit a day earlier.

Industry sources said although cocoa beans from Tawau were among the finest in the world, most of Malaysia's 12 grinders had problems getting their supply because foreign buyers were willing to pay more for the raw material.

"At the moment, many local grinders are importing from Indonesia and blending the beans with local ones, resulting in a poorer quality mix," said a source.

Although MCB's prices were an accepted guide, there have been cases of traders paying three times as much for the same beans in the market if they could buy in large volumes, Mohamed Musa said.

The Cocoa Manufacturers Group, representing grinders and nine major chocolate, food and beverage companies in Malaysia, demanded in May that the government impose a levy on the export of cocoa beans due to problems in acquiring the raw material.

The idea was shot down and the MCB was asked by the government to work out a dialogue between the two sides.

Mohamed Musa said Malaysia's cocoa grinding capacity was currently at around 105,000 tons.

Bean production last year totaled 152,000 tons, of which an estimated 100,000 ton was exported, he said.

"I think the beans are available ... it's just a matter of getting a reasonable price," he said.