Poor quality of Indonesia's cocoa slows export strength

Poor quality of Indonesia's cocoa slows export strength

JAKARTA (Reuters): The poor quality of cocoa beans in Indonesia's key growing areas will slow exports out of the world's third-largest cocoa producer this month, traders said on Wednesday.

"I have checked with the port...There are no big ships scheduled to pick up beans until the end of this month," said one trader in Makassar, the capital of South Sulawesi province.

Makassar is the main port for Indonesia's cocoa exports.

Traders said although daily arrivals of cocoa beans had stabilised at around 300-400 tonnes in the past week, only a small amount were of good quality due to rain and fungus.

"A lot of the cocoa beans have been bought by speculators rather than exporters. It is quite hard to find good quality cocoa beans for export," said another trader.

Fair average quality cocoa beans were quoted at 9,625/9,800 rupiah/kg in Makassar, up from 9,425 rupiah/kg last week, buoyed by demand and fewer supplies.

Differentials widened to $84-$99 a tonne under New York for September beans.

Traders said around 25,000 tonnes of cocoa beans were shipped overseas from Makassar in June, lower than the around 35,000 tonnes exported in June last year.

"We just finished loading 10,000 tonnes of beans to the U.S and 6,000 tonnes to Brazil. There are also small shipments to Singapore and Malaysia," the second trader said.

"But large shipments are unlikely until the end of this month. So we can't predict how much will be exported in July."

The harvest started around March or April in the provinces of South, Central and Southeast Sulawesi, which account for 75 percent of cocoa output from Indonesia.

Arrivals usually peak in June/July before the harvest ends in September, but traders said this year's harvest was shorter than last year because of poor maintenance and pod borer pests.

The lack of good quality beans would force Indonesian grinders to continue to operate below their capacity of 120,000 tonnes of cocoa beans a year, industry sources also said.

Halim Razak, chairman of the South Sulawesi branch of the Indonesian Cocoa Association, said local grinders still in business ground 50,000-55,000 tonnes of cocoa beans last year.

"They cannot compete with overseas traders because buying prices are too high while some of them have financial problems with banks," he said.

bIndonesian grinders were hit badly during the country's economic crisis of the late 1990s.

Industry sources said there were only seven big grinders operating this year from 14 before the crisis.