Update COVID-19 in Indonesia: 927,380 confirmed infections, 26,590 deaths (19 January 2021)
19 January 2021 (closed)
USD/IDR (14,146) -6.00 -0.04%
EUR/IDR (17,335) +57.05 +0.33%
Jakarta Composite Index (6,321.86) -67.98 -1.06%
The price of cacao has risen by almost 20 percent since the start of June 2013 and is now around its highest level of 2013. Moreover, the cacao price is expected to keep increasing as analysts foresee a shortage of the commodity on the global market for the next two years. Indonesia, the world's third-largest cacao producer, is considering to lower the import duty for cacao to meet rising demand of its domestic cacao processing industry (amid limited growth in cacao production). Currently, the country levies a 5 percent import duty on cacao.
In October the new cacao season begins. This means that in the western part of Africa (Ivory Coast and Ghana) preparations begin for the most important cacao harvest of the year: the March harvest. The other main cacao harvest is in September but output of this one is much lower compared to the March harvest. Together, Ivory Coast and Ghana account for about half of the world's total cacao production.
Developments in these two countries have a large impact on the global cacao price because a significant share of their production is exported. In most other cacao-producing countries (both in South America and Asia), cacao is generally sold on the domestic market and thus does not contribute significantly to the global exports. One example of this is Indonesia, which accounts for about 10 percent of the world's cacao output. A large quantity of domestic cacao production is supplied to Indonesia's domestic processing industries. These industries have grown significantly in recent years and have resulted in the situation that Indonesian cocoa processing companies increasingly need to import cacao beans in order to keep processing production rates up. As such, rising global cacao demand in combination with global cacao production rates that do not rise accordingly have triggered a higher cacao price. In the current season, a shortage of 100,000 ton cacao is expected on the world market, while in the 2013/2014 season this number may rise even further.
Indonesia's upstream cocoa industry is in development. The country's grinding capacity has expanded from 250,000 tons in 2009 to 480,000 tons in 2012 and is expected to rise to 500,000 tons in 2014. Therefore, with growing cacao demand but with a stagnating domestic cacao production, the country is predicted to become a net cacao importer by 2015 - if no major changes occur in the country's production rate.
Indonesia's Agriculture minister Suswono said that the lower import duty for cacao is a temporary solution to meet domestic cacao demand - through imports - until domestic production is capable to supply sufficient quantities. For the same reason, the Indonesian government introduced a 15 percent export fee (in 2010) for raw cacao in order to stimulate supplies to the domestic industry.
In 2009, the Indonesian government launched the Gernas Kakao program. This program aims to boost cacao production by rehabilitating and intensifying 1.6 million hectares of cacao fields in the country. The program was originally set to end in 2012 but was extended to 2014. The government wants to produce 2 million tons of cacao annually by 2020 thus becoming the world’s top cacao producer by 2020. However, this seems to be an unrealistic ambition.
In recent years, Indonesia has been home to growing investments in the country's cocoa processing industry. Foreign firms that have built, or are interested to build, facilities in Indonesia include Switzerland-based Barry Callebaut, Malaysian-based JBCocoa and, lastly, Cargill. The latter is expected to open a facility (with the capacity to grind an annual 70,000 tons of cocoa beans) in mid-2014 in Gresik (East Java).
Indonesia is facing difficulties in increasing cocoa's important role in the economic development of the country. Around 90 percent of Indonesia's cocoa output is produced by smallholders who lack the financial means to optimize production capacity, resulting in declining production rates due to aging trees, diseases, floods, and such. Moreover, because of the recent promising perspectives of the palm oil and rubber industries, many farmers change to other commodities as these are more lucrative.