Indonesia's cocoa exports slump for eighth month in October

Cocoa bean exports from Indonesia's main growing island of Sulawesi dived for the eighth consecutive month in October, and analysts said on Wednesday the trend is unlikely to improve as the country enters its rainy season. The world's third-largest cocoa producer exported 6,877.80 tonnes of cocoa last month, versus 33,897.86 tonnes in the same period last year, industry data showed.
Sulawesi's October cocoa exports were also 7 percent lower than September's exports of 7,388.28 tonnes. Indonesia, which lags top two producers Ivory Coast and Ghana, has suffered a bad harvest this year as wet weather damaged the main crop and triggered an outbreak of a deadly fungal disease. "For Indonesia, it is mostly due to the weather not being favourable for cocoa production - too wet," said Lynette Tan, an analyst with Phillip Futures in Singapore.
"Going forward, we are also expecting La Nina to come back in the first quarter, and this could put even more pressure on the production side." Wet weather wreaked havoc on the crop early this year and brought back the Vascular-streak Dieback (VSD) across plantations in Sulawesi.
Investors had begun to turn their attention to the smaller mid-crop from October, which could yield better beans if the weather stays favourable until the end of this year. The rainy season for more than a third of Indonesia began in October, while it will start this month for another third of the vast archipelago, the state weather agency said in September.
The weaker version of La Nina may reappear this year if the weather pattern develops at the end of 2011. La Nina, a cooling of sea-surface temperatures in the Pacific Ocean, sparks drought in places such as Texas and harsher winters elsewhere in North America, but causes above-normal rainfall in Southeast Asia.
"Due to the weather concerns, it doesn't look like it will be any better than previous years," said Tan on the mid-year crop outlook. Indonesia, which accounts for about 10 percent of global cocoa output, launched a $350 million programme in 2009 to boost production to more than 600,000 tonnes in four to five years.
So far it has yet to show results, with harsh weather, growers' failure to heed advice on planting techniques and mismanagement working against the campaign. Output is likely to plunge about a third to around 400,000 tonnes this year, but the Indonesian Cocoa Association (Askindo) expects a recovery in 2012, with output forecast to rise to 660,000 tonnes. "In terms of production, it is pretty hard to get it back up in a short space of time," said Tan.
About 90 percent of Indonesian cocoa growers are smallholders, which has limited the sector's expansion for decades. Many cocoa farmers have chosen to plant cheaper and more profitable crops, such as coffee, rubber or palm oil, and analysts say this will continue. "They will probably stop producing and change to other crops which has more demand in a way," Tan said, adding that within five to 10 years, the Indonesian cocoa industry could be a shadow of what it is today.
US cocoa futures sank 3.6 percent on Tuesday, in their steepest fall in two months, after Greece's shock decision to hold a referendum on its bailout package threatened to intensify the euro zone crisis. ICE December cocoa tumbled $96 to finish at $2,600 a tonne, its biggest one-day drop since September 6. "Generally for the (global) cocoa market, overall there is a larger supply (and) for the Indonesia side for the last two years, production has been falling and this doesn't seem to have created a huge upward rally in cocoa prices," Tan added.