KL cocoa's fate in smallholders' hands

KL cocoa's fate in smallholders' hands

KUALA LUMPUR (Reuter): The fate of Malaysia's cocoa industry is falling into the hands of small farmers as bigger plantations scramble to get out of the crop which they claim is facing its worst times.

Last month's announcement by Golden Hope Bhd, the country's largest cocoa grower, that it will convert all its cocoa trees to oil palm by mid-1999 was the clearest sign of the gloomy outlook in the industry, growers said yesterday.

The Malaysian Cocoa Board, the government body responsible for the industry, said major estates and corporations were sounding the death knell on cocoa because they are inefficient and are operating with high costs.

"Smallholders are getting more out of cocoa than big farms and companies with all the money and technological back-up," said a senior official at the board, who declined to be named.

"It looks like the future of cocoa is with the smallholders. They already control about 50 percent of the crop," he added. Malaysia's cocoa crop extends over 250,000 hectares.

Growers from medium and large plantations told Reuters that 1996 was developing into the worst year ever for cocoa in Malaysia, following a disastrous mid-year crop, and the situation showed few signs of improving by the year-end harvest.

They estimated Malaysian cocoa bean production at around 100,000 tons this year compared with a cocoa board forecast of 122,000 tons and an output of 131,000 tons achieved in 1995.

The growers, mostly located in Tawau, Malaysia's largest cocoa-growing area in eastern Sabah state, blamed poor yields on floods that ravaged the crop between December and February.

The floods destroyed the first crop between April and June and also affected the July-September harvest. They added that recent continuous heavy rain was also threatening the final annual crop between October and December.

The average 3,000-3,200 ringgit (US$1,200-$1,280) currently fetched for a ton of Malaysian cocoa beans is too little to be profitable, said the growers, who have been switching to oil palm enmasse.

"It doesn't make any economic sense to stay with cocoa," said Anthony Tsen, a cocoa grower who earned a total of 367 ringgit from the crop in August -- lower than the 400 ringgit paid to each farm worker.

Tsen said most medium and large farms had chopped down the majority of their cocoa trees to replant with oil palm and that his estate, Landquest Sdn Bhd, was doing the same.

Recovery

While the board believes new higher yielding strains of cocoa trees could result in a recovery in Malaysian production, the growers are more skeptical noting the high cost of inputs needed to ensure the plants produce at their full potential.

The cocoa board official told Reuters that although the average cocoa yield per hectare in Malaysia was 600 to 800 kg, cocoa farms could achieve as high as 2.0 to 3.0 tons a hectare by ensuring regular application of fertilizers to the crop and careful pest control.

"Smallholders are doing it and they can net up to 1,800 ringgit a hectare," said the official.

"Maybe this isn't enough for corporations which have to pay executive salaries and contend with destructive diseases and insects such as the cocoa pod borer. Oil palm is so much easier to plant and profitable too."

Malaysia's 12 cocoa grinders have a total capacity to grind about 120,000 tons of beans annually to produce cocoa butter and powder for the chocolate industry.

But they only process about 60,000 to 80,000 tons of beans as the balance is exported to places such as Singapore, China and India, said a spokesman for Teck Guan Perdana, an integrated cocoa grower and grinder in Sabah.

"We can't say there's no future for Malaysian cocoa as our traders export some 20,000 to 40,000 tons annually and they can't do that unless there's good price and demand," he said striking a bullish note in a largely gloomy industry.