Business

Thursday March 19, 2009

Cocoa grinding firms cut capacity on low demand

By HANIM ADNAN


PETALING JAYA: Ten major local cocoa grinding companies will likely remain in operation this year, but many will reduce their capacities to minimise losses as demand shrinks amid the global economic slowdown, said Malaysian Cocoa Board (MCB) director-general Datuk Dr Azhar Ismail.

Cocoa production was projected to decline by 20% to 30% to about 230,000 to 260,000 tonnes in 2009 from a record 323,653 tonnes in 2008, he told StarBiz via e-mail from Kota Kinabalu yesterday.

Malaysia is the largest cocoa grinder in Asia and the world’s fifth-largest cocoa producer.

Azhar said the main issue facing local grinders this year was decreasing demand for cocoa products, particularly cocoa butter, following a significant drop in the consumption of chocolates.

Datuk Dr Azhar Ismail

The current low cocoa butter ratio (CBR) indicated that the price of cocoa butter is also coming down, he said, noting that “the CBR for Malaysia is expected to drop to 1.8 this year from 2.6 last year”.

But “potential supply shortages will prevent steep falls” in the price of cocoa, he added.

“Cocoa prices are expected to trade at RM6,500 to RM8,000 per tonne (US$1,800 to US$2,100) this year,” he said.

Azhar noted that the global cocoa industry in 2008 and 2009 was forecast to experience a smaller deficit mainly due to tight supplies.

Imports of cocoa beans this year are expected to be lower than in 2008, given the reduction in local grinding activities, with Indonesia contributing about 70% of Malaysia’s total imports this year, according to Azhar.

From January to November 2008, Malaysia imported about 490,771 tonnes of cocoa beans.

To offset slowing demand, and with cocoa grinding companies cutting down on their marketing budgets, the MCB will help out by doing promotions and look for new areas of growth.

“MCB is intensifying promotion programmes in regions that are less affected by the global recession such as the Middle East and India as continuous support to the local industry,” Azhar said.


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