News Straits Times Press, 28 July 2006

Sweeter times for cocoa trade

By Ooi Tee Ching
bt@nstp.com.my

AFTER years of neglect due to low prices and stiff competition from oil palm, cocoa is making a comeback.

Malaysia now plans to almost double the cocoa planted area to 50,000ha by 2010 from the current 33,313ha. This will help supplement growing demand in the cocoa processing industry in the country.

The move comes under the Ninth Malaysia Plan (2006-2010), under which the Government has allocated RM72 million for some 15,000 cocoa farmers to continue planting the crop.

"We started the cocoa rehabilitation programme early this year. So far, more than 2,000 cocoa farmers tending to a collective 2,500ha of cocoa plantations have benefited," Malaysian Cocoa Board (MCB) director general Datuk Dr Azhar Ismail said.

The board provides high-yielding clones to be side-grafted onto the existing mother-tree, fertiliser and environment-friendly pesticides.

"We hope to reverse the shrinking production of cocoa beans. By the end of the year, we target output of 30,000 tonnes," Azhar told Business Times.

Due to competition from other commodities, more lucrative crops like oil palm and rubber, cocoa plantations shrank to 33,000ha last year from a high of 400,000ha back in 1989 on the back of low productivity and sliding cocoa prices.

If there is no further increase in the local production of cocoa beans, imports of the commodity may rise to between 350,000 and 400,000 tonnes, costing at least RM2 billion, by 2010.

"We are side-grafting existing trees with good clones from the MCB. By next year, we should see higher cocoa bean output," said Raub Cocoa Planters Association chairman Koh Ah Kau.

About a quarter of Malaysia's cocoa output comes from farmers in Raub, Pahang. Sabah is the biggest producer of cocoa beans in the country.

"Right now, despite a fungal attack, our yield is 1.8 tonnes per hectare per year. Next year, we hope to go back to normal levels of 2 tonnes per hectare per year," Koh said.

Malaysia's cocoa industry, which saw its first commercial planting in the early 1950s, experienced accelerated growth in the 1970s and 1980s because of high cocoa bean prices.

At its peak in 1989, the cultivated area was 414,236ha. However, persistent low prices in the 1990s prompted planters to switch to oil palm cultivation, causing the cocoa plantation area to shrink.

By 2005, the total cocoa cultivated area had shrunk to 33,313ha, which was less than a tenth of its size during its heydays in the late 1980s.

Under the Ninth Malaysian Plan, the Government aims to balance upstream and downstream activities to help reduce the country's dependence on cocoa imports.

Last year, Malaysia's cocoa processors ground 258,647 tonnes of cocoa beans to make various cocoa-based products such as chocolates, cocoa butter, cocoa mass, cocoa cakes and cocoa powder. However, the country can only produce 27,964 tonnes of cocoa beans.

This has led to Malaysia importing 304,369 tonnes of cocoa beans amounting to RM1.48 billion, of which 80 per cent came from Indonesia.

In May last year, Malaysia and Indonesia forged an alliance on "Bilateral Cooperation on Commodities". The two countries agreed to lay out several action plans to improve their cocoa export markets.

"Both Indonesia and Malaysia export cocoa beans and cocoa products to the European Union. We are joining forces to lobby for the Europeans to lower the import tariffs when our products enter their ports," Azhar said.

Besides the allocation for cocoa tree rehabilitation, the MCB was allocated RM20 million to relocate its research and development centre from Bangi to Nilai.

The new facility will sit on 8ha and house a biotechnology centre to find ways to improve cocoa yield. For downstream products, the centre will conduct experiments to make tastier chocolates and chocolate drinks.

Amid these developments, cocoa price is currently on the rise.

"We're comfortable with cocoa beans being traded at between RM5,000 and RM6,000 per tonne, which is slightly higher than last year's trend. Price stability is important for planters as well as chocolate manufacturers."

Azhar expects this year's cocoa exports to rise by 10 per cent to RM2.1 billion from last year's RM1.96 billion.

"In the first four months of this year, we've achieved cocoa exports of RM657 million. We should see better bean harvest in the second half of the year," he said.

Malaysia could even hit the RM2.1 billion mark because of the higher global consumption of chocolates.

To help the industry, the director general said that the Government is collaborating with the private sector to commercialise a pod-breaker machine.

"This pod-breaker, which can process 3,000 pods per hour, can save time, labour and money. We hope to commercialise it soon," he added.

There are some 2,000 smallholders tending to 3,000ha of cocoa plots in Raub.