Indonesia is the third largest producer of cocoa in the world after Ghana and the Ivory Coast. Indonesian cocoa exports are currently valued at approximately $600-700 million per year and provide the main source of income and livelihood for over 400,000 smallholder farmers and their families. On the island of Sulawesi, smallholder farmers working on plots ranging from 0.5 to 1.5 hectares produce over 80% of the cocoa exports from Indonesia.

Indonesia’s primary competitive advantage in global cocoa trade lies in its ability to supply large quantities of beans. Current cocoa yields in Indonesia range from 400 to 800 kg/hectare, with the potential to increase yields as high as 1 to 1.5 MT/ha. Cocoa yields in West Africa and other major producing countries, on the other hand, are much lower and only average 300 kg/ha or less.

As the largest producer of unfermented bulk beans, Indonesia currently occupies a strong position with few competitors in this segment of the global market. Thus, the major threats to Indonesia’s continued competitiveness in this market segment are internal rather than external.

The major challenge is to improve, or at least maintain, local cocoa productivity. Since global trade in Sulawesi bean is volume based, it is recommended that efforts to improve cocoa productivity must form the basis for any cocoa development initiative in Indonesia.

Quality is another critical concern that must also be addressed. The current marketing structure of the value chain (and global demand for low quality/low price beans) does not provide adequate incentives to improve quality. Without incentives for exporters, intermediaries, or farmers to differentiate their beans and invest in quality improvements they continue to be driven by volume-based transactions. There are some existing schemes of vertical integration including up-country buying stations that could be expanded, where appropriate, to introduce more commercial quality-based incentives for cocoa supply.

There may also be opportunities for further growth and competitiveness of Indonesian cocoa by increased investments in local value addition. This could be accomplished through the commercialization of improved plant varieties or through more efficient process technologies.

Indonesia export of cocoa
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