A multi-million dollar expansion by international cocoa grinders in Indonesia is facing a steep supply shortfall of cocoa beans, fuelling a likely jump in imports from West Africa and threatening smaller local processors.
Although processing of raw beans into the key ingredients for chocolate will jump 25% this year, according to industry estimates obtained by Reuters, this is well behind a near doubling of capacity, leaving some grinders idle.
Commodity giants such as Cargill, top chocolate-maker Barry Callebaut and Malaysian cocoa group Guan Chong Berhad have set up grinding operations in the world's third-largest cocoa bean producer, driven by a local bean export tax and the promise of abundant raw material.
Local grinders are also expanding with Asia-Pacific sales of chocolate confectionery expected to rise about 5% a year for the next three years, according to researcher Euromonitor International, well ahead of U.S and European markets.
But as Indonesian grinding capacity jumps 85% to 600,000t, production has been hit by erratic weather, rampant disease and the failure of a $350 million replanting programme aimed at boosting output to a million tons by 2020.
Output is expected to fall to an eight-year low of 425,000t in 2014, says the Indonesian Cocoa Association, leading to potential financial losses at under-utilised factories for some of the country's 19 grinders.