Cocoa Harvest in Indonesia to Drop on Palm Oil, Rubber Lure

Cocoa Harvest in Indonesia to Drop on Palm Oil, Rubber Lure
Cocoa pods hang from a cocoa tree in South Sulawesi, Indonesia. Photographer: Claire Leow/Bloomberg News

Cocoa-bean production in Indonesia, the world’s third-largest grower, may plunge more than 11 percent in the next five years as farmers switch acres to more lucrative oil-palm and rubber crops, according to a trade group.

Output of the chocolate ingredient could drop below 400,000 metric tons, the lowest level since 2004, as farmers turn to crops that can boost their earnings by 150 percent per hectare, said Zulhefi Sikumbang, chairman of the Indonesia Cocoa Association. The harvest may reach 450,000 tons in 2012 after 435,000 tons last year, he said. The country produced 382,000 tons in 2004, the group’s data showed.

Cocoa climbed 7 percent this year, after a 31 percent drop in 2011, on concerns that West African harvests will decline. Global production has gained 15 percent to 3.96 million tons since 2006-2007, says the International Cocoa Organization. Ivory Coast is the biggest grower and Ghana the second.

“Farmers are more attracted to convert their crops into other more valuable commodities, a trend that I’ve seen in the past year,” Sikumbang said in a March 16 phone interview from Jakarta. Cocoa trees, planted on about 1.5 million hectares (3.7 million acres), may decline to 1.3 million hectares in the next five years, he said.

Lower yields because of aging trees, diseases and pests have hurt incomes from cocoa plantations. Indonesian famers earn about 8 million rupiah ($873) per year per hectare, compared with more than 20 million rupiah from oil-palm and rubber plantations, Sikumbang said. Rubber and palm-oil associations confirmed the figures. Indonesia is the largest producer of palm oil and the second-largest rubber grower.

Price Swings

About 90 percent of the world’s cocoa is produced on farms of fewer than 5 hectares, which means producers often lack the money needed to combat drought, floods or disease, according to the ICCO. Prices have swung from $1,396 to $3,775 since 2006.

Exports from Indonesia may rise to 225,000 tons this year from 200,000 tons in 2011, said Sikumbang. Local consumption is stable at between 200,000 to 225,000 tons, he added.

Cocoa for May delivery was little changed at $2,259 a ton on the ICE Futures U.S. in New York, after a 1.6 percent advance on March 16.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE