Top chocolate producers in Asia struggle to meet rising demand

Jakarta

DEMAND from Asia's growing legions of chocoholics has outpaced the ability of local farmers to supply cocoa beans, prompting a surge of shipments into the region from Africa and South America.

Indonesia, the top producer and processor in the area, imported about 240,000 metric tonnes of beans last year, a record, and may buy more in 2019, said Piter Jasman, chairman of the country's Cocoa Industry Association.

Malaysia boosted shipments 10 per cent to 345,000 tonnes last year, according to cocoa board data. Bean output in Indonesia has shrunk by half in the past decade as farmers battle crop disease and ageing trees, and switch to more profitable crops.

That's turned the country into a net bean importer from major exporter as processing capacity expanded, with overseas purchases more than doubling in five years.

In Malaysia, there's a similar tale, with output dwindling to less than 1,000 tonnes from around 100,000 tonnes two decades ago, according to board data, as farmers turn to palm oil.

The steep drop has prompted processors to hunt for beans elsewhere, including Asia's biggest grinder Guan Chong Bhd, which is thinking of moving plants closer to growers in Africa or South America.

Back in Indonesia, plans to turn the industry around include a possible national programme to boost bean production to 600,000 tonnes by 2024, a crop that would be big enough to meet local demand and exports, the Indonesian Cocoa Association, a growers' group, said last year.

"Hopefully, there'll be no further decline in output because the Agriculture Ministry is funding a programme to help farmers revitalise crops with special fertilisers and superior seeds," said Mr Jasman, also founder of top grinder PT Bumitangerang Mesindotama, or BT Cocoa.

He sees output staying at 270,000 tonnes this year, with grinding at 400,000 tonnes, after allowing for exports.

Global players have been investing in Indonesia to position themselves to meet rising Asian demand. The latest was Olam International Ltd, which spent US$90 million earlier this year to buy BT Cocoa.

By 2020, Asia is expected to be the world's largest market for cocoa powder, used in products including cookies, chocolate drinks and ice cream.

Processing of beans in Asia rose more than 25 per cent in the past four years to about 780,000 tonnes in 2018, according to the Cocoa Association of Asia, which compiles data from Malaysia and members in Singapore and Indonesia. Grindings were up almost 10 per cent on the year in the first quarter.

Increasingly wealthy people are consuming more chocolate confectionery, bakery items and drinks, the group said. The Asian market for chocolate confectionery has grown by a compound annual rate of 5 per cent in five years, as regional economies and population expand, according to Anthony Chien, research analyst at Euromonitor International.

Cocoa futures in New York are trading near the highest level in almost a year, supported by concerns over West African crop supplies. BLOOMBERG