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Cocoa processing migrating to origin, says ADM

By Oliver Nieburg+

13-May-2013
Last updated the 13-May-2013 at 11:52 GMT

Indonesian cocoa grindings are rising fast and are the main driver behind a spike in origin processing
Indonesian cocoa grindings are rising fast and are the main driver behind a spike in origin processing

Cocoa processing is increasingly moving to origin countries, particularly those in regions where chocolate consumption is rising such as Brazil and Indonesia, according to ADM Cocoa’s head of innovation.

Rinus Heemskerk, global director of innovation at ADM Cocoa, said during a recent company visit: “Cocoa is definitely moving back to origin. It’s also because markets are moving more towards origin. 

“So if you look to Asia, we have a factory in Singapore, if you look to Brazil we have a factory in Ilheus, those are also today major cocoa consuming areas. Today Brazil is actually a net importer of cocoa where it used to be 40 years ago the second largest exporter of beans.”

According to the International Cocoa Organization (ICCO), origin grindings stood at 1.4m metric tons and accounted for 40.1% of total processing in 2008/09. By 2012/13, the proportion of origin grindings is expected to rise to 43.1%.

Brazil grinding boost

If ICCO forecasts come to fruition Brazil’s cocoa grind will have risen 13.4% from 245,000 MT in 2009/09 to 245,000 MT in 2012/13.

This comes as value sales of chocolate confectionery in Brazil are forecast to reach BRL 7.8bn ($4bn) by 2015, up 24% from 2011, according to market analysts Mintel.

Indonesian processing spike

More cocoa is processed in Malaysia than any other country in Asia and Oceania, but Indonesia is catching up fast and is the main reason why origin cocoa processing is growing.

The Indonesia cocoa grind has doubled in the past five years to 268,000 MT in 2011/12 and it is set to grow further after cocoa processor Cargill recently announced that it had begun building a 70,000 MT capacity plant in Indonesia, expected to be operational by mid-2014.

Ivorian grind slows on tax rules

Germany’s cocoa grind grew substantially in 2010/11 as Ivorian elections sparked fresh waves of violence and forced cocoa processing back to Europe.

The Ivorian grind is now returning to levels last observed in 2008/09, but is forecast for a slight dip after the country abolished a 20-year-old tax break given to local grinders in its broad cocoa reforms.

There was speculation that Cargill would move or reduce its cocoa processing operations in the Ivory Coast, but it said in February that it would stay, after successful talks with the national government over the same issue.

Another contributing factor to the decline in the Ivory Coast is a fire, keeping one processing plant understood to belong to SAF Cacao, shut for at least three months.

Pros and cons of origin processing

Heemskerk said: “If you are producing in origin then you have to work with the material which is available in that origin. That may sometimes be a disadvantage compared to a factory where you can use the cocoa from wherever it comes whenever it suits you. That’s maybe a limitation.”

Chocolate manufacturers regularly use blends of cocoa beans from different origins, while premium brands often use single origins.

Heemskerk said that prices for cocoa, like any agricultural crop, fluctuates year-on-year and region-by-region. “The fact that you can use multiple origins helps you to get a more stable product,” he said, which isn’t always the case if you process at origin.

However, he added: “The fact that you are right at the source, you can control the entire chain that is a big advantage. And for us we are definitely looking to control the chain as much as we can from farm to finished product.”

Top seven cocoa grinding nations

Country

2012/13 cocoa grind forecasts

Five-year evolution

Netherlands

520,000 MT

+6.1%

Ivory Coast

410,000 MT

-2%

Germany

400,000 MT

+17%

US

395,000 MT

+9.5%

Malaysia

300,000 MT

+7.8%

Indonesia

285,000 MT

+137.5%

Brazil

245,000 MT

+13.4%

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