May 15 (Bloomberg) -- Chocolate demand in Indonesia, the world’s third-biggest cocoa producer, may double in three years because of an expanding middle class and increased incomes.
“Supermarkets, mini-markets are growing everywhere,” Muhammad Lutfi, the country’s trade minister, said at an industry conference in Bali, Indonesia. “They sell chocolate and people will buy more.” He didn’t give consumption numbers.
Increasing demand for chocolate in Asia has spurred expansion of cocoa-grinding capacity in Indonesia. That may cut the country’s bean exports, deepen a global shortage and extend a 23 percent advance in New York futures in the past 12 months. Rising bean prices would potentially boost costs for confectionery makers such as Nestle SA and Lindt & Spruengli AG.
The government may remove the 5 percent tax on bean imports or increase the export duty, which varies between 5 percent and 15 percent, to meet demand from processors, said Lutfi. He estimated last month that domestic grinders will probably face a shortfall of 100,000 metric tons this year as local production won’t be enough. The crop will total 450,000 tons in 2014, little changed from a year earlier, he said today.
“We also have to increase production,” Lutfi said. “We have to consider how we can continue supplying beans to the global market.” The country shipped 188,000 tons of beans to foreign buyers in 2013, the government says. The global shortage may reach 115,000 tons in the 12 months started Oct. 1 after a 174,000-ton deficit a year earlier, according to the International Cocoa Organization.
The value of chocolate confectionery consumption in emerging markets including Asia, Latin America, the Middle East and Africa will grow more than 5 percent annually in the five years through 2018, more than double the rate of the world average, according to Euromonitor International Ltd. Consumers in the Asia Pacific region will eat 1.096 million tons by 2018, a 27 percent increase from 2013, the researcher estimates.
Futures traded at $2,886 a ton on ICE Futures U.S. today, after reaching $3,039 on March 17, the highest level since September 2011.
Cocoa processing in Southeast Asia expanded 3.7 percent during the first quarter from a year earlier to 159,617 tons, the Singapore-based Cocoa Association of Asia said in April.
Bean imports by Indonesian grinders may reach 120,000 tons from 30,000 tons last year, according to Piter Jasman, chairman of the country’s Cocoa Industry Association. Capacity to process beans into powder and butter may climb 67 percent to 600,000 tons from 360,000 tons on new plants and expansions, he said in an interview last month. Lutfi said today the capacity may reach 1 million tons by 2016.
Supply concerns are being compounded by increasing prospects of an El Nino weather pattern, which can bring dry winds to West Africa, including top growers Ivory Coast and Ghana and parch parts of Indonesia.
“El Nino is an event we should be very aware of,” Gerard Manley, chairman of the Federation of Cocoa Commerce Ltd., said. “It’s very clear El Nino will happen this year.”
Forecasters are strengthening predictions for the arrival of the phenomenon, characterized by warming equatorial waters in the Pacific Ocean, and Australia’s Bureau of Meteorology said this month that the event may start in July. Goldman Sachs Group Inc. and ABN Amro NV have listed cocoa among crops that could be hurt by the weather pattern.
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