Indonesia cocoa imports to soar as output hits 8-yr low-industry

(Reuters) – Indonesia’s cocoa bean imports may soar nearly 300 percent in 2014 to meet demand from grinders as domestic production likely falls to its lowest level in eight years on erratic weather, an industry group told Reuters on Monday.

Demand from Indonesia’s booming grinding sector could further boost global prices, which have rallied to 2-1/2 year highs on fears that a world cocoa supply deficit may be greater than expected.

Production may fall around 6 percent to 425,000 tonnes in 2014, the lowest output since 2006, as farmers struggle to contain increased crop diseases from changing climate conditions, Zulhefi Sikumbang, chairman of Indonesia Cocoa Association (Askindo) told Reuters.

“Relatively high humidity is very conducive for fungus to develop which causes rotten pods and black pod diseases. Also outbreaks of cocoa pod borer are very common now,” Sikumbang said by phone from Padang, the provincial capital of West Sumatra.

At the same time, exports were likely to remain steady at around 125,000 tonnnes, generating demand for more imports from the country’s expanded cocoa grinding industry.

Indonesia, the world’s third-largest cocoa producer after Ivory Coast and Ghana, imported 40,000 tonnes of beans in 2013, but imports could jump to 150,000 tonnes this year to meet demand from grinders if they run at full capacity, Sikumbang said.

“If this year’s exports are unchanged, that means grinders will be affected. We need to import more, and this also means higher costs,” said a grinder in Indonesia

Sikumbang said Indonesia’s total cocoa grinding capacity in 2014 would be 600,000 tonnes per annum.

Asia’s cocoa grindings climbed to 170,684 tonnes in the fourth quarter of 2013, up about 10 percent from 155,237 tonnes a year ago as gains in Indonesia offset a 9 percent drop in grindings in Malaysia, according to dealers.

The Cocoa Association of Asia, which released the Q4 data, groups together grinders in Malaysia, Indonesia and Singapore.

Indonesia is drawing companies such as Cargill and top chocolate maker Barry Callebaut to invest in grinding plants.

Although Indonesia’s exports were likely to remain at 125,000 tonnes this year, Sikumbang said exports could eventually fall below 100,000 once Cargill starts grinding this year, with total capacity of 60,000 tonnes.

When ground, cocoa beans yield roughly equal parts butter, which gives chocolate its melt-in-the-mouth texture, and powder – used in cakes, biscuits and drinks.