Local cocoa bean exports set to rise

Local cocoa bean exports set to rise

KUALA LUMPUR (Reuters): Malaysia's imports of cocoa beans, particularly from Indonesia, are expected to increase this year following a poor mid-crop in main producer Sabah state on Borneo island.

Malaysian cocoa grinders bought 40,000-50,000 tons of Indonesian beans last year to make up for the shortfall in local output.

"It's difficult to say how much beans will come in, but it certainly will be more than last year," said a trader at a Malaysian grinder. He said Malaysian grinders have been buying beans from Indonesia's Sulawesi as Sabah's crop turned out to be less than initially expected.

"The April/May crop did not do well, probably because of heavier than normal rainfall and an extremely good main crop at the end of last year,"said a cocoa grower in Sabah.

He said the cocoa growing region had received 15 percent to 20 percent more rain than normal.

Traders said that unless there was a bumper crop at the end of the year, Malaysia's production in 1999 might not rise much from some 90,000 tons seen last year.

Traders said some grinders have increased capacity use although grinding was still not up to total capacity of about 140,000 tons. Grinding activity had dwindled to 70,000-80,000 tons in 1998.

"Capacity use has to be increased because of cost... economies of scale," said another trader at a local grinder.

Physical trade has been slow as sellers were holding back from selling due to low prices although the market had recovered strongly recently, traders said.

On Thursday, the Malaysian Cocoa Board quoted Standard Malaysian Cocoa (SMC) 1A out of Tawau at an average 3,750 ringgit a ton compared with 3,150 ringgit a week ago. It fell to below 3,000 ringgit a ton at the end of May.

Traders said differential for Sabah beans was at about 135 pounds a ton under London prices.

"But I think this is temporary. At the rate the market is going up, the differential would widen again, probably back to 150-155 FOB,"a trader said.