Department of Primary Industries & Fisheries

 

 

dpi noteCocoa: a potential new crop for Northern Australia?

Craig Lemin, Department of Primary Industries and Fisheries.

Cocoa being established in field trials,North Queensland 

Established cocoa in a field trial at Mossman, North Queensland.

Introduction

Research trials to investigate the feasibility of commercial cocoa production in Australia were planted in 2000 and harvesting at most sites commenced in 2002. However, it will be a further 3-4 years before enough detailed agronomic and economic information is available to make a decision on the viability of a local industry. Yields have been high by world standards and are still increasing.  However, current indications on the viability of commercial cocoa growing in Australia are marginal.  Much will depend on the product quality, prices received and actual costs of production.  The trials are continuing until June 2007 amidst some small commercial plantings by growers in north Queensland.  This note looks at the potential for an Australia industry based on the world market outlook for cocoa and outlines some of the production challenges that must be solved.

History

The first cocoa introductions to Australia were around 1900 in North Queensland. It is unlikely that cocoa was ever commercially cultivated and the fate of these early introductions is unknown.

In the mid-1980s cocoa seed (and some clonal material) was introduced from Papua New Guinea, Sarawak and Samoa. Formal evaluation was limited and ended in 1987 when the DPI (now DPI&F) trials were discontinued - although material was distributed to interested parties in north Queensland. Much of this material still survives on private properties along the North Queensland coast from Ingham to Mossman. There is also cocoa growing in public gardens in Cairns and Innisfail and various nurseries in the region have at times propagated cocoa.

The Northern Territory Department of Primary Industry and Fisheries also planted Cocoa near Darwin in 1989 using seed from Papua New Guinea (Keeravat).

Where could cocoa be grown in Australia?

Temperature is the major factor that determines the extent of suitable production areas. Minimums of 18-21°C and maximums of 30-32°C are ideal for cocoa production. In Queensland, coastal areas north of Mission Beach including Mena Creek and East Palmerston appear suitable, although growth and yield checks may be experienced during some winters. North of Gordonvale, temperatures in coastal areas below 200 m appear satisfactory and above 16oS (Cape Tribulation) significant areas may also be suitable further inland. Elsewhere, areas may be suitable in northern Western Australia (Kununurra region) and large areas in the Darwin and Arnhem Land regions of the Northern Territory although high maximum temperatures experienced in inland areas may be a problem.  However trials in these locations have performed poorly compared to plantings in north Queensland due to high maximum temperatures.

Natural rainfall is inadequate for successful cocoa production in all of these regions due to the significant dry season - this includes the wet tropical coast of Queensland, and supplementary irrigation would be needed. Total water requirements will be site dependent but likely to be significant where high temperatures are experienced and the dry season is more prolonged.

Within the climatically suitable regions, the areas with soil types traditionally preferred for cocoa are limited. However, provided soil physical characteristics are suitable, soil fertility limitations may be managed with fertiliser applications. Since irrigation will also be provided, it is likely that cocoa in Australia could be grown on a range of soil types not generally selected for cocoa elsewhere in the world.

The world cocoa scene

From the early 20th century to 1999/00, world cocoa production has grown at an annual average rate of 3.5%, reaching a record 3,100,000 tonnes in 1999/00. The graph shows the 1999/00 share of world production by country. Although there are a large number of producing countries, 70% currently comes from Côte d'Ivoire, Ghana and Indonesia. Until last century, Brazil and Latin America (mainly Mexico, Venezuela and Ecuador) dominated global production, however disease outbreaks in Brazil have dramatically reduced production. In its place, Asian production expanded rapidly from the mid-1970s. Indonesia remains an important producer, although cocoa pod borer is a threat to sustained production. After rapid development in the 1980s the industry in Malaysia has declined due to failure of larger-scale production systems and increased competition from other crops (particularly oil palm).

Recently cocoa prices have risen sharply after declining to very low levels in the late 1990s early 2000s. High prices in the 1970s encouraged industry expansion that led to oversupply by the late 1980s. Subsequent low prices resulted in consumption consistently exceeding supply during the 1990s and depletion of cocoa stocks, but supply shortages were averted by the economic crises in Eastern Europe and Asia.

Cocoa: Share of World Cocoa Production, 2004/05

Share of World Cocoa Production, 2004/05

Cocoa: World Cocoa Prices, 1971/2004

World Cocoa Prices, 1971/2004 (Source, ICCO)

Cocoa is traded as dried bean and the world standard price is based on trading in various markets. In the physical market, marketing boards, trading companies, growers and agents sell cocoa to major manufacturers or dealers. Terminal or futures markets also operate to hedge against the risk of unwanted price changes. Premiums and discounts will apply in relation to the actual cocoa tendered compared to specified standards.

"Bulk cocoas" account for the overwhelming majority of world production. The term does not imply inferiority - but arises from the fact that they are the basic feedstock of the cocoa and chocolate industry. "Fine" or "flavour" cocoas are used by manufacturers for blending and usually attract premium prices. However, they must be considered a highly specialised market with declining importance to the cocoa market as a whole.

Manufacturers include grinders and confectioners. Grinding operations roast, grind and press cocoa to produce the various raw ingredients used in manufacture of cocoa products. Confectioners manufacture and market chocolate products to consumers. Many confectionery companies integrate grinding operations as part of their business.

Some characteristics of world production

  • Predominantly grown by smallholders
  • Highly concentrated - 3 major producing countries
  • Low average yields
  • High labour requirement during harvest
  • Significant expansion limited to same 3 major producers and continued concentration therefore likely
  • Increasing vulnerability of supply to a production shock in a major producing country
  • Increasing losses and threats from pests and diseases
  • Recent liberalisation of marketing in major producing countries has led to lower quality and increased exposure of growers to price changes
  • Political instability in some producing countries
  • Ageing farmers and plant stock in West Africa
  • Quality problems
  • Labour supply issues in some countries
  • Production can't be "wound-up" quickly
  • Low prices have led to reduced inputs and lower productivity on many farms.

Some characteristics of world consumption

  • Sustained consumption growth throughout the 20th century
  • Traditional major markets of Western Europe and North America remain important - industry advertising is high
  • Significant emerging markets in Asia, Eastern Europe and Latin America
  • Growth in China limited over the next decade
  • Large potential in Russia but uncertain due to economic situation
  • High prices/supply shortages may risk market potential due to establishment of consumption patterns that do not include chocolate or at best include chocolate with a low cocoa content (particularly in China)
  • Positive health aspects (antioxidant flavinoids) and negative health aspects (mainly from fat and sugar content of chocolate) may influence consumption
  • Growing use of alternatives to cocoa butter a threat to demand growth.

Outlook

While the outlook for continued demand growth of cocoa looks positive, the longer term prospects for sustainable production to meet this demand are tenuous and many chocolate manufacturers are becoming concerned. Supply shortages and high prices are a long-term threat to future growth of cocoa consumption since rationing of stocks will affect the most price sensitive markets first which are also the emerging markets. Subsequent establishment of consumer patterns of increased consumption of alternative snack foods and the use of less, or lower quality, cocoa in chocolate products could seriously effect long-term consumption of cocoa in these markets.

Despite historically sustained growth, forecasting cocoa supply, demand and price movements is very difficult. However, as expected prices rose in 2001 due to a tightening of supply. Recent outlooks point to a demand growth range of 1.5-4.0% per annum. The current (November 2005) price is about US$1,400 per tonne. The long term outlook is for a price of US$1,200-2,000 per tonne in 2009-10 depending on demand growth

Critical factors for an Australian industry

Researchers and industry have been interested in cocoa production in northern Australia since the 1960s. A number of reviews were conducted showing there were suitable areas for commercial production and limited trials demonstrated that promising yields were possible. However, a combination of fluctuating world prices and the traditionally labour intensive nature of production have prevented any industry development. In 1999 a project to investigate the feasibility for cocoa in northern Australia was commenced in response to interest and backing from Cadbury-Schweppes Australia.

Any significant Australian cocoa industry would need to compete on the basis of world pricing given our current full import regime and the absence of any large-scale domestic processing facilities.

Cocoa is not a crop in which technology is likely to provide a major advantage for Australia over the traditional producing countries. This is because cocoa pods do not lend themselves to mechanised harvesting and the potential for mechanical pruning is untested. However, greater efficiency of harvest may be achieved through mechanical assistance in collecting and transporting pods and pod processing after harvest can be successfully mechanised. This, combined with a production system that includes synchronised pod ripening, high yields and relative freedom from pests and diseases, may allow viable production under Australian conditions.

Another factor is that typical Australian farming units, with educated owner-managers, appear well suited to cocoa growing. There is the potential to combine the good features of smallholder and larger-scale management systems ie. medium sized plantings, tailored management practices, utilisation of elite planting material and high yields. Australian production systems may be based on diversification of existing farming enterprises (with areas down to about 5 0 ha) or larger, stand-alone operations.

Yield and price

Preliminary economic modelling of cocoa growing in Australia is based on average yields of 3-4 t/ha dry bean (compared with a world average yield of about 1 t/ha). Significant reductions in the labour requirement for pruning, harvesting and processing operations are also assumed. Viability is sensitive to the world price, over which the producer has little influence.  The most recent modelling indicates costs structures that are above the current or projected cocoa price.  Very optimistic assumptions are required to obtain acceptable returns.  lian grown product, but should not be relied upon to deliver industry viability.  Premium prices for good quality, reliable supply and a safe, clean image are an opportunity for Australian grown product, but should not be depended on to deliver industry viability.

Analysis of a possible Australian industry

Strengths

No known viral disease
No known cocoa pod borer
Suitable growing regions available
Technical expertise and capacity to innovate growing and processing
Capable grower base
Existence of domestic chocolate manufacturers

Weaknesses

High labour costs
No previous commercial production experience
No extensive information on agronomic performance under Australian conditions available
No large genetic resource base
Limited possibility for mechanised harvesting
No pod processing of fermentary facilities in place
No significant domestic cocoa processing industry

Opportunities

Produce quality product with clean, safe image Likelihood of high yields
Mechanization
Tenuous world supply combined with continued demand growth
Intercropping with commercial timber species for shade
Establishment of domestic cocoa grinding facilities
Niche production for tourism
Producers leveraged to the value chain

Threats

Low world prices Variable demand growth
Disease and pest incursions
Improved world yields
Expanded world production
Failure to mechanise

The current research program

Five commercial hybrid seed lines were imported from Papua New Guinea and planted in evaluation trials at South Johnstone, Mossman, Darwin, Broome and Kununurra. Additionally, a number of clonal lines have been introduced via quarantine ex Reading University in the UK. The trials are investigating the agronomy, yield and quality of cocoa grown at the different sites. Planting layouts, management practices and mechanisation aspects are being examined to maximise productivity and reduce production costs (particularly labour inputs). The trials were planted in mid-2000.  Problems were experienced at the Broome site and it was not established.  The small trial at Kununurra was removed in 2004.  Relative underperformance of the Darwin trial will see it discontinued at the end of 2005.  However, the Queensland sites have performed well with harvesting commenced in 2002 and continuing until June 2007 when a final report will be published.

Further information

Web sites

Reports

  • Corthorne, T.G., 1987. Prospects for growing cocoa in northern Queensland. Internal report, Queensland Dept. of Primary Industries.
  • LMC International Ltd., 2000. The World Cocoa Market Outlook. Prepared by Ann Gray 22 May 2000.
  • Urquart, D.H. and Stephens, S.E., 1960. Survey of the prospects for cocoa as a crop for north Queensland. Internal report, Queensland Dept. of Primary Industries.
  • Watson, B.J., 1987. Review: Cocoa potential and possible research direction in north Queensland. Internal report, Queensland Dept. of Primary Industries.
  • Watson, B.J., 1992. Introduction, evaluation and management of cocoa cultivars for far north Queensland. Final Report for Rural Industries Research and Development Corporation, Project DAQ39, Queensland Dept. of Primary Industries.

Books

Wood , G.A.R. and Lass, R.A., 1992. Cocoa. Tropical Agriculture Series, Fourth Edition. Longman Press, London.

Contacts

  • DPI&F Call Centre - phone 13 25 23 (8 am to 6 pm from within Queensland); non-Queensland residents phone 07 3404 6999.

Information contained in this publication is provided as general advice only. For application to specific circumstances, professional advice should be sought. The Department of Primary Industries and Fisheries, Queensland has taken all reasonable steps to ensure the information in this publication is accurate at the time of publication. Readers should ensure that they make appropriate inquiries to determine whether new information is available on the particular subject matter.


Last updated 22 November 2005