Cocoa bean exports were hit for the first time in four months as heavy rains damaged crops and disrupted transport, according to the Indonesian Cocoa Association.
Indonesia is the third largest producer of cocoa beans in the world, the vast majority of which is produced by smallholders. Sulawesi, the main cocoa growing region, has more than 600,000 cocoa farmers.
Shipments from south and central Sulawesi fell 21 per cent to 36,168 metric tonnes in August from 45,552 tonnes a month earlier, said the industry body. Exports were 47,527 tonnes in August last year, it added.
Meanwhile, Indonesia's 10 per cent tax on cocoa bean exports which is meant to subsidize the local grinding industry may encourage domestic cocoa bean processing, but also risks reducing the country's cocoa output if growers have little financial incentive to improve crop quality, reports Bloomberg.
According to the report, major global cocoa players said that the tax does change the economics of grinding in Indonesia, but Noel Janetski, president director of PT Mars Symbioscience Indonesia, a unit of food manufacturer Mars, notes that "Farmers are businessmen. If there is not enough money for farmers, they will do something else."
The Indonesia cocoa growing sector faces hurdles such as poor quality beans and erratic power supply that have undermined capacity.
Projects run by industrial chocolate supplier Cargill are aiming to bolster cocoa growing in the Sulawesi region through providing farmers there with information and advice on best practices, including tree maintenance and post-harvesting methods.
The global commodities giant said that it also provides farmers with transparent information about cocoa market prices.
Separately, industry insiders claim demand from industry and on the consumption side for chocolate is on the increase, with cocoa-bean inventories in European warehouses monitored by NYSE Liffe falling 6.4 per cent in the two weeks ended August 23.
And last week saw a hike in New York cocoa futures for December delivery and similarly in London with cocoa for September delivery.