11th Dec 2012
LATELY many reports have cropped up on the major shift in the global demand for cocoa to Asia. This is in contrast to its traditional market in Europe that can also lead to the end of its decades of dominance in cocoa grinding and processing operations.
The declining demand in Europe also triggered an interesting development whereby there has been increasing new investments by Western companies in cocoa-growing regions in Africa and also new areas in Asia, namely Laos, Vietnam and Indonesia. Apparently there is fear that the strong demand in Asia could result in a tight supply situation for cocoa going forward.
Cocoa demand in India, for example, has already increased by three-fold in seven years while China imports have risen by over 100% since January 2012 compared with the same period in 2011.
Even Rabobank has projected a deficit of almost 100,000 tonnes based on its estimate of about 4.1 million tonnes in cocoa production for 2012-2013 period against a higher consumption estimated at 4.2 million tonnes.
Hence the surging demand for cocoa in Asia has brought about corporate initiatives such as the setting up of a cocoa excellence centre in Cote d'Ivoire, investments to boost production among 35,000 cocoa farmers in Cameroon, Cte d'Ivoire and Nigeria implemented the Sustainable Trade Initiative under the auspices of the World Cocoa Foundation (WCF) with the support of the Bill & Melinda Gates Foundation and several WCF member companies.
Therefore, given the latest cocoa developments on the international front, how can Malaysia as the world's fifth largest cocoa producer take advantage of the current situation?
Firstly, however, let's be clear that Malaysia which produced about 32,000 tonnes of cocoa beans a year is also a big importer of cocoa beans.
Unknown to many, Malaysia is currently Asia's largest cocoa grinding and processing hub with 10 major cocoa-grinding players.
With local cocoa production of about 32,000 tonnes a year, it is practically impossible to support the huge demand from the local grinding and processing industry which has an installed capacity of over 360,000 tonnes.
Local cocoa production can only cater to about 10% of grinders' demand while the remaining 90%, or over 400,000 tonnes of cocoa beans, are imported annually.
Logically, to meet the growing demand for cocoa in Asia, industry observers said Malaysia should further improve on its grinding capacity to possibly hit 400,000 tonnes annually and also further expand its processing and production of higher value-added cocoa products such as cocoa butter, cocoa powder, chocolates and cocoa-based confectionery.
Malaysia should also quickly seize the opportunity especially when it was recently reported that the sluggish growth and deteriorating processing margins in Europe saw many Western chocolate producers shying away from processing cocoa themselves and instead prefer to buy processed cocoa products.
At the same time, the Government via the Malaysian Cocoa Board (MCB) is also encouraging more “serious and hard working” smallholders to rekindle their interest in cocoa cultivation.
Efforts are already being made to develop new cocoa areas at about 1,567ha per year. The MCB envisaged that by 2020, Malaysia will be able to have 40,000ha of planted cocoa area with an annual production of about 60,000 tonnes.
Currently, about 21,000 smallholders (those with 6ha land or below) are involved with the new cocoa planting programme nationwide.
[Source]
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