Singapore, Oct 22 - Buyers have defaulted on around 50,000 tonnes of cocoa beans from Indonesia after prices dropped more than 20 percent in the last two months to track declines in New York futures, traders said on Wednesday.
"You just can't find buyers. At least 50,000 tonnes of beans have not been claimed. Poor quality bean is also a problem," said a Jakarta-based dealer. "I won't name names but buyers who have defaulted on shipments are from Asia, including China," he said.
The discounts of Sulawesi beans over New York futures <0#CC:> have widened to $250 from $200 two months ago. New York's benchmark December cocoa <CCZ8> settled down $48 at$2,037 per tonne on Tuesday, the lowest settlement for the spot-month contract sinceDec. 3, 2007.
Indonesia is the world's third-largest cocoa producer, after Ivory Coast and Ghana, and accounts for more than 10 percent of global output. It mainly sells beans to grinders in Asia, Europe and the United States.
"The defaults affect sellers in Sulawesi. Stocks are piling up. There are also reports of defaults on Sumatran beans, but it's not much," said the dealer, adding many contracts were signed when New York prices hovered around $2,800 in August.
Cocoa is mainly grown on the Indonesian island of Sulawesi, but it is also cultivated in Java and Sumatra. Sulawesi accounts for 75 percent of Indonesia's production.
"The bigger the price differential is, the higher the possibility of a default. That's the issue," Antonius Pasaribu, an official at the Indonesian Cocoa Association, told Reuters on the sidelines of a cocoa conference in Singapore. New York cocoa has dropped almost 40 percent in value since spiking to a 28-year peak at $3,385 in July as long liquidation hit soft commodity prices and dealers avoided risk due to the deepest financial crisis in 80 years in the United States.
Indonesia cocoa output is expected to fall to 480,000 tonnes in 2008 from 520,000 tonnes in 2007 after a fungal disease killed hundreds of cocoa trees in plantations across Sulawesi and affected quality, according to the Indonesian Cocoa Association.
"We signed contracts to a buyer in Shanghai for the sale of 100 tonnes of beans but they haven't opened a letter of credit until now. They didn't say they will cancel the purchase, though," said a dealer based in Medan, the provincial capital of North Sumatra.
"They told us they have some financial problems, but they also mentioned falling prices of cocoa as a reason behind this delay," he said.'
The International Cocoa Organization expected global cocoa output growth to fall below 2 percent year-on-year in 2008/09, having grown at an annualised rate of around 4 percent in the last three to five years, due to a slowdown in global economy.