RI cocoa output to decline by 7.7%

RI cocoa output to decline by 7.7%

Eva C. Komandjaja, The Jakarta Post, Jakarta

Indonesian cocoa production could decline by 7.7 percent this
year due to the severe drought in the second quarter of the year,
Indonesian Cocoa Association (Askindo) chairman Zulhefy Sikumbang
says.

He said cocoa output was expected to fall to 400,000 tons this
year from 433,411 tons last year.

"The cocoa harvest will probably be shifted to next year
because of the drought, and we are hoping for better output next
year compared to this year," Zulhefy said.

Of the total cocoa plantation area of 776,900 hectares,
approximately 209,392 hectares are in South Sulawesi.Indonesia
mostly produces bulk cocoa (BC). Zulhefy said that 95 percent of
the world's demand was for BC, while demand for fine cocoa (FC)
was only five percent, mostly from Europe. He said the price for
BC on the international market was currently around US$1,400 per
ton, while the price for fine cocoa was US$3,000 per ton.

Indonesia is the world's third largest cocoa producer, after
the Ivory Coast and Ghana. Indonesia supplies approximately 11
percent of the world's annual demand of 3 million tons.

According to a May 2003 Askindo report, 80 percent of the
country's cocoa export goes to Southeast Asian countries. Total
exports to Malaysia reached 43,243 tons with a total value of
US$79 million, while exports to other Southeast Asian countries
reached 13,902 tons with a total value of US$25 million.

Zulhefy said that most Indonesian cocoa bean exports were of
low quality because 90 percent of the exports consisted of
unfermented cocoa beans. He said that most cocoa farmers were
unaware that fermenting the beans would increase the cocoa price
on the international market.

As a comparison, 450,000 tons of unprocessed beans would yield
approximately US$600 million, while 200,000 tons of processed
cocoa would probably reach US$700 million.

Zulhefy said that on average, the price of processed goods was
three times the value of unprocessed goods on the international
market.

He also said that many producers preferred to export their
harvests rather than process it for the domestic industry.

He said that part of the problem was due to the absence of
export tax for the beans, but on the other hand the government
imposed a 10 percent value added tax (VAT) for domestic
consumption.

This led to a lack of supply of cocoa locally, he said.

Indonesian Cocoa Industry Association (Apikci) chairman Sonny
Satari said that from the 12 cocoa processing factories listed in
the association, only three were still operating.

They only operated at 40 percent of their factory's
capacities, and he mentioned as an example that one of the large-
scale cocoa industries had to import cocoa beans from Malaysia.

Currently, the government is planning to impose a 2 to 3
percent export tax on cocoa to prevent large-scale exports of the
commodity and to provide sufficient raw material for the local
cocoa processing industries.

Sonny said that Apikci had proposed a 10 percent export tax.
He said that it would balance the current 10 percent VAT applied
to the cocoa producers if they sold their goods to domestic
industries.

But still, he said the government should not just impose the
export tax but also lower the VAT to encourage cocoa producers to
market their products domestically instead of just exporting
them.

Meanwhile, when asked about the possibility of making
Indonesia the world's biggest cocoa producer in the world,
Zulhefy said that the productivity of cocoa plantations here was
relatively low.

"Currently, we can only produce approximately 600 kg per
hectare per year. We hope that we can increase it by 1.5 ton per
hectare per year, so the Indonesian cocoa output will rise as
well," Zulhefy said.

He said that Askindo had targeted to enlarge the cocoa
plantations area from 776,900 hectares to 1 million hectares in
2010.