Indonesia completes rise as Asia's top cocoa power

Indonesia is to seal its place as Asia's top cocoa country by overtaking Malaysia in processing volumes this season, having long held first place in regional production.

Indonesian processors are to crush 295,000 tonnes of beans in 2013-14, which started in October, the International Cocoa Organization said.

The figure represents a 20,000-tonne upgrade from the organisation's previous forecast, in February, besides being a jump of 16% year on year.

And it puts Indonesia on course to overtake Malaysia, for which the grindings volume estimate was cut by 15,000 tonnes to 275,000 tonnes, a drop of 6% year on year.

Switch to origin

Indonesia's growth as a major cocoa grinding centre reflects in part a switch by processors to handling more volumes in bean-producing countries themselves - saving on transport and labour costs, and meeting growing developing country demand - rather than focusing on Western consumption areas as in the past.

The likes of Switzerland's Barry Callebaut, US-based Cargill and Guan Chong from Malaysia itself have set up Indonesian cocoa processing operations, with Singapore's Olam International last month unveiling plans for its own plant.

Grindings at origin countries will rise by 72,000 tonnes to 1.835m tonnes, the ICCO said.

Indonesia is the third-ranked cocoa producing country, with output expected at 425,000 tonnes in 2013-14, well ahead of Malaysia's 7,000 tonnes.

Duty calls

However, Indonesia has in cocoa, as in other commodities, used taxation as a tool to support processing in the country, introducing in 2010 a monthly export tax on shipments of the bean itself.

The country also taxes shipments of crude palm oil more than refined product, and its decision this year to impose a ban on exports of nickel ore has sent prices of the metal to two-year highs.

Indonesian exports of finished cocoa will overtake those of raw beans this season, the ICCO said.

The country may also ban a tax on imports to help processors, which are running well below their capacity, estimated at about 600,000 tonnes a year.

'Intense competition'

"Local cocoa bean supplies continue to constrain the country's booming grindings sector," the ICCO said, adding that Indonesia was expected in 2013-14 to prove "the most dynamic countries engaging in processing activity".

Conversely, "intense competition" from Indonesia was seen taking "a toll" on Malaysia's cocoa processing fortunes.

Asia will overall grind 871,000 tonnes of cocoa in 2013-14, a rise of some 2% year on year, according to ICCO forecasts.

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