Phibro closes down its Sulawesi cocoa project

Phibro closes down its Sulawesi cocoa project

LONDON (Reuter): Commodities trader Phibro said yesterday it closed down its cocoa operations in Indonesia because the business had ceased to be attractive.

"We are just getting out of a business that doesn't have the upside it had when we first got into it," Phibro Commodities director Anthony Ward said.

Trade sources in Indonesia said earlier that Phibro, one of the top cocoa buyers in the country, on Tuesday ended its partnership with a local company based in Ujung Pandang, capital of the cocoa growing region of South Sulawesi.

Indonesian traders said the company had been a major buyer of cocoa from Sulawesi, purchasing over 100,000 tons in the last 2- 1/2 years alone.

Ward said Phibro, a unit of U.S. Salomon Inc, had not made a loss in Indonesia but no longer saw the opportunities that were there before because margins on Indonesian cocoa exports had ceased to be attractive.

"The reason (for closing down) is because we found the business attractive when prices of Indonesian beans were lower and there were good margins and New York was still a buyer of last resort, so you had guaranteed returns.

"But once the market became more sophisticated and the differential between Indonesia and Ivory Coast narrowed -- by more than 10 percent of the overall market price, from $300 to $150 -- it's become less rewarding to be there," Ward said.

Phibro had shut down its Malaysia cocoa operations two years ago for the same reason and moved to Indonesia, he added.

"It used to be good business exporting Malaysian cocoa but it isn't any more."

The Indonesian closure had nothing to do with a worldwide reduction of Phibro's headcount reported last October and would not affect the company's overall cocoa operations, Ward said.

"I can confirm there is no change in what Phibro is doing in the cocoa market," he said.