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.