Indonesia is one of the world's largest producers of cacao. In 2009, the country's production of cacao beans totaled 849,875 tons. The world's largest producer, the Ivory Coast, produced 1.3 million tons. Ghana, which previously was the second largest producer, produced only 750,000 tons.
The Indonesian production is contributed by smallholder plantations, state plantation companies and private plantation companies. Smallholder plantations made up around 92.7 percent of the country's total cacao plantations of 1,592,982 hectares in 2009.
Indonesia exports most of its production of cacao beans as cacao processing industry has not expanded in he country. Most farmers also choose to sell their cacao beans to exporters which generally offer a better price.
Most of cacao beans exported by Indonesia are not fermented, therefore, the price is cheaper. The difference is as high as Rp2,900 per kg.
In March 2010, the government announced a regulation slapping export tax on cacao beans to encourage development of cacao processing industry in the country.
The government also has announced a new policy to adopt an Indonesian National Standard (SNI) for cacao beans and powdered cacao this year.
Cacao products include cacao beans, shell and cacao waste, cacao paste, cacao fat and cacao powder listed in the tariff codes of HS 1801.00.00.00 to HS 1505.00.00.00.
Cacao beans are used by midstream industry to produce to cocoa liquor, cocoa cheese, cocoa butter, and cocoa powder, which are used to feed downstream industry producing chocolate, chocolate based candies and milk, etc.
Cocoa liquor is produced by grinding cacao beans to turn out soft cocoa pulp mixed with cocoa fat. The fat could be separated by pressing cocoa liquor until it is dry. After being dry it is ground again to turn out cocoa powder.
Cocoa butter, which is the most expensive, constitutes cocoa fat an extraction from cocoa liquor in the process of producing cocoa powder. Cocoa butter is often used as an ingredient for chocolate candies and basic material for cosmetics like lipstick.
Plantation expansion slow
Indonesia's cacao plantations have continued to expand in the past 5 years. In 2007, Indonesia's cacao plantations totaled 1,379,279 hectares expanding 6.8 percent to 1,473,259 hectares in 2008 and to 1,592,982 hectares in 2009 or an annual growth of 8.1 percent.
Cacao plantations are dominated by smallholder plantations making up 92.7 percent of the country's total plantations of 1,592,982 hectares in 2009. A farmer, however, has only an average of 1 hectare.
Potential area for cacao plantations are found in East Kalimantan, Central Sulawesi, Southeast Sulawesi, Maluku, and Papua totaling 6 million hectares.
The main type of cacao grown in Indonesia is named Lindak type with production center in South Sulawesi, Southeast Sulawesi and Central Sulawesi . There is also a type named Mulia cacao grown by state plantation companies in East and Central Java.
The government has announced and launched a program of replanting over 70,000 hectares of cacao plantations, rehabilitation of 235,000 hectares, intensification of 145,000 hectares and pest control over 450,000 hectares of cacao plantations in three eyars starting in 2009. The government hopes to see an increase in the country's production of cacao from Sulawesi, East Nusa Tenggara Timur, Bali, Maluku and Papua.
Sulawesi has largest plantations
Cacao plantations in Indonesia are found mainly in Sulawesi, accounting for 60 percent or 953,691 hectares of the country's total plantations. Sumatra has the second largest plantations accounting for 18 percent or 300,461 hectares.
Java and Maluku& Papua each has 6 percent of the country's cacao plantations. Other are found in Nusa Tenggara 5 percent and Kalimantan 3.5 percent.
Production of cacao beans growing
The main type of cacao grown in Indonesia is named Lindak type with production center in South Sulawesi, Southeast Sulawesi and Central Sulawesi. There is also a type named Mulia cacao grown by state plantation companies in East and Central Java.
The Indonesian cacao beans are not easy to melt that they are good for blending and if they are fermented they are not inferior to Ghana's cacao in taste.
Most of Indonesian cacao beans, however, are exported without being fermented first. Only around 10 percent of the country's cacao production is fermented.
Farmers choose not to have their beans fermented as traders prefer to buy non fermented cacao beans. The trader even buy cacao beans before being harvested.
The country's cacao bean production has continued to increase almost every year since 2005. Production grew 3.3 percent a year. A decline was recorded only in 2007 to 740,006 tons, down from 769,386 tons in 2006.
The decline in production was mainly caused by falling productivity in South Sulawesi and West Sulawesi, which contribute 60 percent to the country's total production .
Cacao production in South and West Sulawesi averages 500 kg/hectare/year , much lower than potential productivity of 1.5 tons/hectare/year. The decline in productivity is caused by the fact that most of the plants have been more than 15 years old. In addition there was pest that east cacao fruits and Vascular streak dieback (VSD) or mushroom infection.
In the following two years, the country's production of cacao rose 7.1 percent to 792761 tons in 2008 and 7.2 percent to 849876 tons in 2009.
The smallholder plantations accounted for 91 percent of the country's production of cacao with state plantation contributing 4 percent and private company plantations 5 percent .
The farmers have not been free from the problem caused by the pest and plant disease resulting in a decline in the country's. production of cacao .
Cacao processing industry wobbling
Indonesia has not made much progress in developing its cacao processing industry. The production capacity of the country's cacao processing industry even fell from 313,400 tons per year in 2006 to 299,800 tons in 2007.
The decline followed the closure of a number of factories in 2005-2007. In 2008, the capacity rose slightly to 322,800 metric tons when one producer expanded its capacity by 23,000 metric tons per year.
In 2005, his country had 16 cacao processing companies. The number declined in the following two years after two players stopped operation and another company cancelled plan to build new factory. Currently there are only 13 companies, but even the 13 companies are not all active producing and other operates far below their production capacity.
By 2009, there were only 8 companies active in operation including 3 still operating below their capacity and 5 are operating at full capacity. Five other companies already stopped production.
Lack of incentives contributed to the declining condition of the industry. Until 2007, the government slapped value added tax (VAT) 10% on cacao beans traded on the domestic market resulting in higher price to be paid by the processing factories.
Most of the country's production of cacao beans is exported with export tax exemption until early 2010. The exemption from export tax contributed to growing exports.
In 2010, the government began to slap export tax on cacao bean hoping to reduce exports and encourage processing of the beans in the country.