War has small impact on Indonesia's cocoa exports

The Jakarta Post, Jakarta

The Iraq war has thus far had no significant impact on the country's cocoa exports as the global demand for the commodity remains high due to a shortage of supply, the Indonesian Cacao Association (Askindo) said.

The association's executive director, Zulhefy Sikumbang, told The Jakarta Post on Wednesday that the price for the commodity slipped to US$1.9 per kilogram from $2.2 per kilogram prior to the start of the war.

"The decrease in price is not significant. We are all right, as long as it remains above the production cost of $1 per kilogram," he said.

He predicted the price would hover at a favorable range above the production cost given the supply shortage. The world demand for cocoa currently reaches 3 million tons a year, while only 2.4 million tons are supplied a year.

The cocoa supply started dropping last year due to the civil war in the Ivory Coast, which was the world's largest cocoa producer until the war. Following the war, Indonesia has become the world's single largest producer of cocoa.

"Our primary markets for cocoa are the U.S. and Southeast Asia, while we export a small amount to Europe. Therefore, the war has not affected our exports much," he said.

However, in the long term, if the war is prolonged and has economic repercussions on the U.S., the cocoa price would be affected significantly, he said.

Last year, Indonesia produced 450,000 tons of cocoa and supplied 15 percent of the world's demand. This year, Zulhefy said, the output was expected to drop to 400,000 tons due to a long drought and pests.