7th May 2012

Dear Members,

The cocoa industry went through some turbulent times in the last two years. Over the course of the two years we saw 1) upheaval in the Ivory Coast’s political situation, resulting in the change of government, and 2) the dispute in port surcharges in Ghana between the exporters and the shipping lines. These two events caused serious disruptions in the cocoa supply chain. Fortunately, the political situation in the Ivory Coast and the dispute in Ghana have been resolved and the situation has returned to normal.

To enhance the earnings of the cocoa farmers and promote a sustainable crop development, the Ivory Coast government has, since the early part of 2012, introduced a cocoa reform and created a new regulator – Cocoa & Coffee Council. This reform scheme is quite similar to the one used by the Ghana Cocoa Board. The Cocoa & Coffee Council sets a guaranteed price for the farmers as well as the export price of cocoa. The liberalized system involves the forward selling of the cocoa crop in advance. However, questions are still being raised about whether the scheme will work as many see flaws in the pricing mechanism. This has caused much anxiety among the cocoa trade.

The cocoa export tax in Indonesia has attracted more downstream investments and boosted the local grind by about 80 percent from about 120,000 MT in 2010 to about 215,000 MT in 2011. On the other hand, it has also caused a significant decline in cocoa exported and a scale down of the trading activities within the industry.

To boost cocoa development and production, the Indonesia government introduced the GERNAS program in 2009. The scheme helps cocoa farmers to rehabilitate old plantings and poor yielding farms. The target of this program is to rehabilitate about 70,000 hectares per annum. To see the progress, a field trip was organized for our members to visit the cocoa farms under this GERNAS program in Palu Sulawesi. Based on our observations, the effort put in was not wasted as we saw quite some progress being made. As a consequence of this, the overall cocoa production has started to recover slightly, with more new plantings coming to maturity. This positive result has prompted the Indonesia government to announce that it will extend the program by another 3 years to 2015.

As part of the effort to boost a sustainable cocoa development in the region, we also organized a field trip to visit cocoa farms in Davao, Philippines and Vietnam with the aim to promote cocoa development in these countries. It was good to see the efforts by the respective local governments to encourage farmers to cultivate cocoa.

In Vietnam, we agreed to sponsor a three-year farmer training program in good agricultural practices. This program is in partnership with the Nam Long University of Vietnam under the leadership of Dr. Phuoc to train field facilitators who will in turn educate farmers on good agricultural practices. The total cost of the three year program is about US$100,000. We conducted a review of the project in February this year. I am happy to report that we saw positive impact on some of the cocoa farms we visited with better yield and farm practices. However, more work and resources are needed to make it a success. Competing corps like Pepper, Rubber, coffee, etc which provided a better returns to the farmers continue to tamper the growth of cocoa based on the prevailing prices. In the meantime, I wish to thank all members who are participating in funding the project.

Turning to cocoa and chocolate consumption, following the global financial meltdown in 2008/2009, the world economy has made a gradual recovery with developing countries in Asia, Latin America and Eastern Europe leading the way with strong economic and consumption growth. The strong consumption growth in these developing countries has more than made up for the weak consumers spending in the developed countries in Europe and in the U.S.

Despite the current sovereign debt issue in EU, consumption in developing countries remains buoyant as the current high commodities prices will continue to spur consumer spending on rising income and provide a better living standard, especially those in the developing countries. This bodes well for the cocoa industry.

On the association’s activities, we conducted training workshops, both in Makassar as well as Singapore, on the Market and Arbitration Rules & Procedures for the Cocoa Contract. The turnout for both events was very good. Unfortunately, due to unforeseen circumstances, we have yet to officially launch the Cocoa Contract. The in-coming Council is expected to look into this.

With the cooperation of all our members of the grinding industry and the help of International Enterprise (IE) of Singapore, we have started compiling cocoa grinding statistics for Malaysia, Singapore and Indonesia from the beginning of 2011. The grind figures are published in the association’s website every quarter. Please do look out for it.

My tenure as chairman of the Council for the last 8 years has been rewarding and at times challenging. I have been asked to stay on. I thank the Council and members for the confidence you had in me. However, given my work commitments, time has come for someone new to take over the leadership. Please continue to provide your support to the new incoming Council members.

Yeong Chye