Sulawesi Indonesia Cocoa Sulawesi

Context and background

Indonesia is the third biggest cocoa producer after Ivory Coast and Ghana, with a 15% share of total world production. Cocoa is cultivated here on over 1.5 million hectares, generating over $1.2 billion in exports annually. Cocoa production provides the main source of income for over 1,400,000 smallholder farmers, mainly (71%) on Sulawesi. Despite the importance of cocoa cultivation in Indonesia’s economy, productivity, bean quality and farm profitability have declined due to aging tree stocks and unsustainable farming practices, which lead to soil infertility, pest and disease pressures and poor product quality. This declining trend has begun to reverse in the last few years with on-farm investments in tree rejuvenation, replanting and sustainable farming practices.

Since the beginning of 2010, enterprises such as Cadbury and Mars announced that they would increasingly use Fair Trade certified cocoa beans sources certified as ‘sustainable’. To meet these voluntary targets, it is estimated that over 25% of Sulawesi’s cocoa crop will need to be traceable and certified by 2020. This represents a new and growing market opportunity for farmers. The challenge is that in order to offer high enough volumes and to make certification – and traceability – feasible, farmers will need to ally themselves in well-organized farmer groups.

The program area supported by VECO Indonesia is situated in Polman (Polewale Mandar) district in West Sulawesi province. The main commodity produced in this area is cocoa, with a total production of 79,029 MT on a total cocoa farm area of 119,884 ha. As in other parts of Sulawesi, the main problems in cocoa production in Polman are low quality and low yields because of pests, diseases and low use of fertilizers. Average yields are only 0.5 tons of cocoa per ha. per year, whereas 2 tons should be achievable under optimal conditions.

Traditionally, cocoa farmers break the pods of their cacao plants and sundry the beans up to 7% moisture. They then sell the beans to local traders, individually or collectively. Local traders in turn sell to bigger traders in port cities. Today, the big cocoa traders involved are Armajaro, Cargill, ADM and Olam. In this program, we only work with Armajaro. These traders sell to processors and confectioners such as Petra Foods, PT Mars, Nestle, Blommer and Hershey.

For companies like Armajaros, the work being done by NGOs to build the capacities of local farmer groups is a crucial missing link. These companies have neither the time to conduct such development work on the ground, nor the development concepts to fit their cocoa-trading activities into a framework to promote sustainable livelihoods and farming systems. The work of NGOs with farmer groups facilitates improvements in quality, traceability, labelling, and collective selling.