Cocoa

Cocoa beans come in three main varieties, namely: Forastero, Criollo and Trinitario. Forastero is the most widely used variety of cocoa, contributing around 90 percent to global cocoa production. Although the quality of Forastero is inferior to the other cocoa types, its beans are the biggest and much more resistant to diseases. The Criollo variety is considered the highest quality cocoa bean but it has lower yields than those of Forastero, while also being less resistant to diseases.

Indonesia in Global Context

Indonesia ranks among the world’s top cocoa bean producing countries. Currently, it is the world’s seventh-biggest cocoa bean producer. However, table 1 does show that Indonesia’s cocoa bean production is rather insignificant when compared to top producer Ivory Coast.

Table 1; Biggest Cocoa Bean Producing Countries (in 1,000 Metric Tons):

Country	2020-2021	2021-2022	2022-2023	2023-2024*
Yvory Coast	2,248	2,121	2,241	1,800
Ghana	1,047	683	654	580
Ecuador	365	365	354	430
Cameroon	292	295	290	300
Nigeria	290	280	280	270
Brazil	200	220	220	220
Indonesia	170	180	180	160

^{Source: www.statista.com}

The International Cocoa Organization (ICCO), an inter-governmental organization established in 1973 under the auspices of the United Nations (UN), estimates that global cocoa production reached 4,382,000 tons in the 2023-2024 marketing year. And considering Indonesia’s cocoa bean production is estimated at 160,000 tons over the same period, it means Indonesia contributes a modest 3.65 percent to global cocoa production.

This is insignificant compared to Ivory Coast which contributes 41.1 percent to the total. And so, when supply problems occur in Ivory Coast it can quickly lead to rising global cocoa prices.

Global Cocoa Bean Price

Chart A shows that since late-2023 global cocoa prices have been rising structurally and rapidly, touching a series of all-time record highs. As a consequence, confectionery prices around the world, ranging from candy bars to hot chocolate, are heavily affected.

Prices are high amid concern over adverse weather conditions and cocoa bean supply tightness in West Africa, which accounts for more than 70 percent of global cocoa production.

A more structural problem is that most cacao bean plantations are run by (poor) smallholder farmers who lack the financial means to engage in proper maintenance as well as in investment in the rejuvenation of their cacao trees.

Chart A; Cocoa Futures in 2014-2024 (in US Dollar per Ton):

[this page is being updated]

The table below indicates production forecasts of the world's top cocoa producers for the 2014-2015 season (the cocoa season runs from 1 October to 30 September the following year).

Cocoa Production 2015/2016:

Country	Production
Yvory Coast	1,581,000
Ghana	778,000
Indonesia	350,000
Ecuador	232,000

^{in tons
Source: International Cocoa Organization (ICCO)}

Cocoa in Indonesia

Indonesia's Cocoa Production and Export

The cocoa bean is one of the most important agricultural export products of Indonesia. In the past 25 years, the Indonesian cocoa sector has experienced massive growth, driven by rapid expansion of smallholder farmer participation. Indonesian smallholders contribute - by far - most of the national production, thus outperforming big state plantations and large private estates. The country currently has approximately 1.5 million hectares of cocoa plantations.

Indonesia's main locations of cocoa production are:

1. Sulawesi
2. North Sumatra
3. West Java
4. Papua
5. East Kalimantan

The main Indonesian cocoa producing region is the island of Sulawesi which accounts for around 75 percent of Indonesia's total cocoa production. As Indonesia’s cocoa productivity per hectare has been lagging behind that of other cocoa-producing countries, the government started a five-year cocoa revitalization program in 2009 to boost production through intensification, rehabilitation and rejuvenation activities, covering a total area of 450 thousand hectares. Factors that are hampering progress in the cocoa industry are aging trees (planted in the 1980s), insufficient improved planting materials and little farm maintenance. More investment in this sector is needed to reach the government's one million tonnes annual production target by 2013-2014.

In terms of export, cocoa forms Indonesia's fourth largest foreign exchange earning from the agriculture sector (after palm oil, rubber and coconut). However, the majority of Indonesia's cocoa export constitutes raw beans instead of processed cocoa, meaning that Indonesia loses out on added value revenues. The most important destination countries for Indonesia's cocoa beans are Malaysia, the USA and Singapore.

The table below shows Indonesia's national cocoa production and export.

	2010	2011	2012	2013
National Production  (in tons)	575,000	435,000	500,000¹	575,000¹
National Export  (in tons)	280,000	200,000	120,000¹

^{¹ indicates a forecast
Sources: Indonesia Cocoa Association and Indonesian Coffee and Cocoa Research Institute}

Future Prospects of the Indonesian Cocoa Sector

The World Cocoa Foundation stated that annual increase in global demand for cocoa has been three percent per year, for the past hundred years. It is estimated that global cocoa demand will increase by similar levels in the coming years and, as such, puts Indonesia in a potentially fortunate position as the country is one of the largest producers and exporters of this commodity. The country's current primary competitive advantage lies in its ability to supply large quantities of cheap (lower quality) cocoa beans.

However, the country is facing difficulties in increasing cocoa's important role in the economic development of Indonesia. Around 90 percent of Indonesia's cocoa output is produced by smallholders who lack the financial means to optimize production capacity, resulting in declining productions due to aging trees, diseases, floods and such. Moreover, because of the recent promising perspectives of the palm oil and rubber industries, some Indonesian farmers have shifted their focus towards those commodities, causing that the current 1.5 million hectares of cocoa plantations may decline further in the coming years.

Throughout its history, the majority of Indonesia's cocoa production has been exported in the form of raw cocoa beans. This has encouraged the government to stimulate national value-added processing industries. One important measure for this was the imposing of an export tax on raw cocoa beans in 2010 (decree No. 67/2010), amounting between five and 15 percent depending on world price fluctuations. Previously, export taxes only applied to processed beans. This new export tax is an incentive for establishing more domestic fermenting industries as well as a signal for processing firms to increase their performance as there have been reports that some cocoa bean processing firms are not operating at full capacity (this could be attributed to various factors, including the country's inadequate infrastructure).

Recent reports state that Indonesia's grinding capacity has expanded from 250,000 tons in 2009 to 480,000 tonnes in 2012, while cocoa exports are forecast to decline.