Kuala Lumpur, Aug 5 - Cocoa grindings in Malaysia will inch up in the current crop year as Asia's largest processor turns to beans from Africa and Papua New Guinea to compensate for supply woes in Indonesia, an industry official said on Tuesday.
Indonesian beans now account for 70 percent of grindings in Malaysia, against 90 percent a few years ago, and shipments from Papua New Guinea and West Africa bridge the gap, Azhar Ismail, director-general of the Malaysian Cocoa Board, told Reuters.
"Malaysian grinders are weathering the situation in Indonesia quite well with imports from other countries as there is a pressing need to use up the grinding capacity," Azhar told Reuters by telephone.
Indonesia, the world's third-largest cocoa producer, has been struggling to increase its output as ageing cocoa trees have made the crop vulnerable to pest attacks.
And more recently, persistent rains in the plantation areas hampered delivery of cocoa beans, dealers have said.
Malaysia has 10 grinders with a total installed capacity of 360,000 tonnes, Azhar said, with grindings expected to rise 1.2 percent to 305,000 tonnes in the current crop year to September.
In the last crop year, Malaysia processed 301,500 tonnes of beans, generally sourced from overseas because of insufficient domestic supply.
Cocoa beans are sold to grinders for processing into butter and cake, which is later pressed into powder to make cakes, beverages, ice cream and for coating in chocolate-making. Butter is a key ingredient for chocolates.
Malaysia was once a leading bean producer, with output reaching as much as 247,000 tonnes in 1990, but farmland was later diverted to growing lucrative palm oil.
Malaysia now ranks ninth among the world's cocoa producers but has focused on its grinding industry, which imports the beans to be processed into exports such as cocoa butter and cake.
Cocoa output will be flat at 32,000 tonnes in the current crop year with smallholders accounting for 70 to 80 percent of production while larger estates and plantation firms have cut down on cocoa holdings, Azhar said.
"We have abundant land for cocoa and we are encouraging more smallholders to grow cocoa but the real boost should come from plantation firms," Azhar said from the eastern state of Sabah on Borneo island, where most of Malaysia's cocoa is grown.
London cocoa futures were little changed overnight and touched a one-month high, basis second month, after last week's strong rally.
December futures in London were down 3 pounds at 1,583 pounds a tonne after touching 1,600 pounds, the highest level for the second month since July 4.
For now, a rehabilitation programme replacing cocoa tree branches with new shoots and raising productivity targets for smallholders may help cocoa farmers capitalise on the soaring cocoa prices, Azhar said.