RI cocoa production expected to bounce back this year

RI cocoa production expected to bounce back this year

By Sylvia Gratia M. Nirang

JAKARTA (JP): After being hit by a severe dry spell caused by
El Nino, Indonesia's cocoa production is expected to recover in
1999.

The executive director of the Indonesian Cocoa Association
(Askindo), P.S. Siswoputranto, told The Jakarta Post that
Indonesia's cocoa production is expected to reach 330,000 tons in
1999, a six percent increase compared to the 310,000 tons
produced last year.

"The effect of the La Nina weather phenomenon for this year's
cocoa harvest will not be as drastic as El Nino's. If the weather
condition continues to be favorable for cocoa trees, I believe
that our cocoa output could reach 330,000 tons in 1999," he told
the Post.

Siswoputranto said that despite the effects of the 1997 El
Nino-caused drought, the drop in the country's cocoa output in
1998 was not as extreme as predicted.

"We expected that production in 1998 would at least reach the
1997's level of 307,000 tons. But we are still gathering data
from the provinces, and we believe that cocoa production might
increase slightly to 310,000 tons for 1998," he said.

Siswoputranto said that the association initially predicted
that the country's cocoa harvest in 1998 would stand at 285,000
tons, a 10 percent drop compared to 1996's figure of 317,000
tons, due to a blistering drought in the country's cocoa
producing regions caused by El Nino.

During the El Nino cycle in 1997/1998, Indonesia experienced
its most severe drought in 50 years. The country could only
produce 307,000 tons of cocoa beans in 1997, far below its
initial forecast of 330,000 tons, due to the prolonged drought.

The El Nino weather phenomenon, named by Peruvian fishermen
after the Christ child, is an abnormal weather system in the
tropical Pacific Ocean which triggers exceptionally warm and
long-lived ocean currents which disrupt global rainfall and wind
patterns and cause droughts or flooding across the globe.

The phenomenon, which occurs every two to seven years, has
unleashed natural disasters around the world, damaging crops for
two successive years and causing turmoil in the world commodities
market.

La Nina, which means "little sister" in Spanish, is brought
about by unusually cool temperatures in the Pacific Ocean and
often follows the drought-inducing El Nino. Its arrival brings
more rain and violent tropical storms.

Indonesia is currently the world's third largest cocoa
producer after the Ivory Coast and Ghana with an output of
317,000 tons of cocoa beans in 1996, or about 10 percent of the
world's supply.

The association's data shows that of the 307,000 tons of cocoa
produced in 1997, about 239,000 tons were produced by small land
owners, 35,000 tons by state plantations and 33,000 tons by
private estates.

Exports

Despite the slight increase in production last year, cocoa
exports were plagued with problems, including the quality of the
cocoa and difficulties obtaining letters of credit, Siswoputranto
said.

While farmers' incomes dramatically increased last year
because the fall of the rupiah against the U.S. dollar propped up
prices of most commodities, for exporters it was not a period of
wine and roses as they had to take out expensive loans to boost
their working capital to cope with rising prices.

Siswoputranto said that before the crisis started there were
nearly 100 exporters, but now there are only about 20 exporters
left.

Siswoputranto said that last year the United States,
Indonesia's biggest chocolate buyer, often unilaterally seized
and cut the prices of Indonesia cocoa due to what it said was a
quality problem.

"In 1998 the loss (from the detentions) ran as high as US$30
million," Siswoputranto said.

He added that the price cuts and seizures were imposed on
Indonesia's cocoa by the U.S. Food and Drug Administration (FDA)
because the cocoa did not meet U.S. standards.

The FDA automatically detained Indonesian cocoa, which is
generally dried improperly, because its contained insects,
residuals, fungi and low fat content.

The United States imported some 85,000 to 100,000 tons of
cocoa from Indonesia last year from the total production of
310,000 tons, with most of the rest going to Europe.

According to the association's data, Indonesia exported about
169,404 tons of cocoa from January to July last year worth a
total of $262.95 million.

The United States was the largest importer, with about 85,828
tons worth $135.50 million, while Singapore imported about 36,124
tons valued at $52.23 million.

Indonesia exported about 143,355 tons of cocoa beans, 2,715
tons of cocoa paste, 6,652 tons of cocoa powder and 16,691 tons
of cocoa butter from January to July last year.

The country exports its cocoa beans to 20 countries, including
the United States, Germany, the United Kingdom, other European
countries, Singapore, Thailand, Malaysia and China.

Cocoa products are exported to North America, Europe, Japan,
Hong Kong, Sri Lanka, Nigeria, Russia and Poland.

In 1997, Indonesia exported about 266,271 tons of cocoa worth
$419.757 million. About 103,942 tons were exported to the United
States, followed by Singapore with 52,103 tons.

Siswoputranto said Indonesia processed some of its cocoa beans
to support the local chocolate industry, which needs about 65,000
tons annually.

Prices

Siswoputranto said last year cocoa prices increased due to the
scarcity of supply and weaker currencies.

He said cocoa prices on the world market surged to a ten year
high in May at $1,762 per ton, driven by nagging fears that the
world's biggest cocoa crop in the Ivory Coast would be damaged by
the El Nino effect, causing an expected global cocoa deficit of
450,000 tons.

"But after May 1998, prices weakened to $1,550 per ton due to
the sluggish demand caused by the weakening economies of several
main cocoa buying countries in Asia and the removal of the ban
against the use of cocoa butter substitutes in the chocolate
industry imposed by Spain and the Netherlands," he said.

He said that world prices would continue to be depressed this
year because the removal of the ban, introduced in mid-1998,
would cut the demand for cocoa beans by 200,000 tons.

Siswoputranto said that weather conditions and currency moves
would be the key factors determining local prices throughout
1999, while the weather and the supply from the Ivory Coast and
Ghana would determine world prices.

The fall of the rupiah against the greenback had boosted
prices of local cocoa beans since the economic crisis hit the
country in July 1997.

He said that average quality beans were quoted at between Rp
9,200 and Rp 9,400 per kilogram in Ujungpandang, South Sulawesi,
the country's key producer of cocoa beans with 70,000 hectares
producing 60 percent of Indonesia's total cocoa production, when
the rupiah was about Rp 8,000 against the U.S. dollar.

The beans were sold at about Rp 3,300 per kilogram before the
crisis began in July 1997 when the rupiah was about Rp 2,400
against the dollar.

The increase in cocoa prices on the local market may cause
farmers to sell poor quality cocoa and unfermented cocoa.

"Farmers are unwilling to ferment their cocoa beans because
they want to avoid additional costs, even though the price per
ton of fermented beans is between $100 and $200 higher," he said.

He said his office, in cooperation with other bodies, was
trying to improve cocoa quality by introducing a fermentation
system to cocoa processing.

"The government should impose a tighter inspection on cocoa
exports and not allow traders to export unfermented cocoa," he
said.

Table: RI cocoa production, 1987-1998

(Year; Production (tons)):
(1988; 79,335),
(1989; 110,509),
(1990; 142,347),
(1991; 174,899),
(1992; 207,147),
(1993; 258,059),
(1994; 269,981),
(1995; 304,866),
(1996; 317,729),
(1997; 307,080),
(1998*; 310,080).

* Estimate

Source : Askindo