April 3, 2024
JAKARTA – Indonesia expects a surge in the global price of cocoa may soon affect domestic food and beverage producers, with the Industry Ministry urging firms to anticipate the impact on their businesses.
The cocoa futures price skyrocketed by more than 130 percent to around US$9,900 per tonne this March, compared with the beginning of this year, according to Trading Economics.
Meanwhile, Market Insider data show the cocoa spot price exceeded $10,000 per tonne by the end of March.
“Things seem stable domestically for now, with no reports from the industry players. However, it’s inevitable that we [Indonesia] will be impacted soon,” said the Industry Ministry’s Agro-industry Director General Putu Juli Ardika on Thursday, as quoted from Bisnis.
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Indonesia currently imports 55 percent of its cocoa, with the remaining 45 percent sourced domestically, according to the Industry Ministry.
A decade ago, the country was able to meet 85 percent of its chocolate demand domestically, with only 15 percent being imported.
Rising global cocoa prices were attributed to the El Niño weather phenomenon, which has brought erratic weather patterns to West Africa, according to a report by the International Cocoa Organization (ICCO) last month.
Major producers like Ivory Coast and Ghana, which produce 70 percent of the world’s cocoa, had been hit by heavy rains, dry heat and disease outbreaks, squeezing cocoa supplies worldwide.
The ministry’s Putu highlighted major cocoa producers were facing aging cocoa trees, which dampened production. Indonesia also faced similar problems domestically, he said.
“Indonesia’s cocoa trees are already aging as well,” Putu said.
Acknowledging the domestic production level stuck at 55 percent, he warned that the skyrocketing raw material price would be a challenge for the industry to level up its productivity level and its capacity.
To boost local cocoa production, the government has offered replanting schemes of some cocoa trees so growers could boost production up to 600 kilograms per hectare, an increase from currently around 200 kg per hectare.
Amid a surge in the global cocoa price, the Trade Ministry has decided to raise price reference for cocoa exports by over 33 percent to $6,711 per tonne compared with the previous month, according to its statement on Thursday.
It attributed the increase to output decline in major producing countries as well as plant diseases ravaging cocoa trees.
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Arsil Aliasar, cofounder of homegrown chocolate Minang Kakao told The Jakarta Post on Monday that his business had largely remained unaffected by the global surge.
The company relies on its own cocoa, which allows it to maintain productivity levels despite external factors.
“Many factors contribute to cocoa and chocolate price increases,” Arsil said. “In this case, those most impacted are industry players who rely on traders and independent cacao farmers for their supply.”
Meanwhile, the Indonesian Food and Beverage Producers Association (Gapmmi) said in October last year that a surge in cocoa prices would weigh on the industry, as quoted from Kontan.
However, producers will likely refrain from hiking the price, Gapmmi said, citing a need to match the purchasing power of Indonesian consumers. Instead, firms would find ways to reduce input costs as part of efficiency efforts.