Currently, Indonesian cocoa farmers already have it rough, Sikumbang said. Besides the weak weather conditions, Indonesia's cocoa trees are relatively old, most of them planted in the 1980s, and therefore productivity continues to decline. However, more than 90 percent of cocoa plantations in Indonesia are owned by smallholder farmers who lack the financial resources to invest in new trees. Sikumbang said nearly 70 percent of cocoa trees in Indonesia are currently "old".

Although the Indonesian government launched a USD $350 million program in 2009 to boost Indonesia's cocoa production above 600,000 tons per year (while an additional USD $100 million was invested in early 2015 to distribute seedlings), these efforts have shown limited results. Sikumbang said part of the problem is that the government has not succeeded in educating cocoa farmers about better farming-techniques.

Moreover, the total of 1.7 million hectares of cocoa plantations that exist in Indonesia could decline as farmers tend to switch to other agricultural crops such as rubberrice and corn.

Meanwhile, Indonesia's cocoa bean export is expected to decline 29 percent (y/y) to 27,000-28,000 metric tons in 2016 in line with the decline in the nation's cocoa production. However, it would mean a 30 percent drop in cocoa export from last year's 39,622 tons. Indonesia's cocoa exports have been falling since 2014 as the government set a higher export tax, an effort to boost domestic cocoa consumption.

According to data from Indonesia's Statistics Agency (BPS), cocoa bean imports into Indonesia fell in the first nine months of 2016 (compared to last year) to 40,424 tons and may reach 46,000 tons at the year-end. Sindra Wijaya, Executive Director of the Indonesian Cocoa Industry Association (AIKI), said lower production and imports of cocoa beans means Indonesia's cocoa bean processing industry only operates at 50 percent of its full capacity (800,000 tons).

Wijaya said two factors are behind the falling utilization rate of Indonesia's cocoa bean processing plants. Firstly, the government raised the VAT on imported cocoa beans in 2015 which implies that it becomes less attractive to import cocoa. Moreover, Indonesian authorities ordered stricter tests in the nation of origin for imported cocoa beans. Secondly, Indonesia's own cocoa bean production figure has been sliding.

Indonesia is the world's third-largest cocoa bean grower, after Ivory Coast and Ghana.

Cocoa Bean Production & Export Indonesia:

    2014   2015   2016   2017
 National Production
 (in tons)
400,000 377,000 350,000¹ 375,000¹
 National Export
 (in tons)
 63,334  39,622  27,500¹  

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