Sydney, 16 May (Bloomberg) ' Cadbury Schweppes, the fourth-biggest candy maker, is backing trial coc...
Sydney, 16 May (Bloomberg) ' Cadbury Schweppes, the fourth-biggest candy maker, is backing trial cocoa plantations in northern Australia amid concerns of a global shortage of the main ingredient of chocolate.
The Australian government wants to establish a domestic cocoa industry to reduce imports, while Cadbury, which along with local units of NestlÃ© and Mars get most of their cocoa from Africa, wants to secure reliable long-term supplies.
'There is some concern that in five to 10 years' time, we may have trouble meeting demand (because of) political instability, ageing plantations, (plant) disease and aging farmer populations,' said Craig Lemin, agricultural engineer with the Queensland agriculture department.
Cocoa futures prices have risen 46% this year as supplies from Ivory Coast, the biggest cocoa grower, were disrupted by political unrest. Candy makers are searching for supplies from countries with more stable governments.
Cadbury, which had sales of £4.5m ($6.4m) in 2000, wants Australia to grow cocoa to assure continuity and reliability of supply for its local business, Lemin said. World demand for cocoa is forecast to exceed supply by 204,000 tons during the current crop year, London-based ED&F Man Cocoa reported earlier this month. That would be the largest deficit since Man began keeping records in 1947.
Cadbury, the maker of Crunchie and Flake, and the government's Rural Industries Research & Development are contributing more than A$600,000 for the three-year trial. The trial may be extended beyond June, 2002, when it is scheduled to finish, Lemin said.
About four hectares of cocoa trees planted in Western Australia, Northern Territory and Queensland states are expected to bear their first cacao seeds next year. This will help researchers evaluate the potential for a commercial cocoa industry.
Domestic production would reduce imports of the product, presently a A$245m ($128m) a year tab. About 59,000 tons of cocoa and cocoa-related products were imported in 2000, the Australian Bureau of Statistics said.
'It is very early days, the trees are only establishing,' Lemin said. 'It could be another decade before we are starting to see any commercial production in Australia.'
Cocoa for July delivery rose £29, or 3.5%, to a six-week high £851 a metric ton when last traded on the London International Financial Futures and Options Exchange.
Cadbury Schweppes Australia spokeswoman Karina O'Meare declined to comment on the trials, saying it was too early to evaluate the projects' feasibility.
Still, some traders doubted Australia's ability to compete against the major producers, such as the Ivory Coast, Ghana, Nigeria, Cameroon, and Indonesia, which have lower labour costs.
'It beats me how you are going to do it,' said Wayne Cameron, an importer with Juremont Pty in Sydney. 'It is seven years before they get the first beans, then you've got to get the product from the tree into the factory, process it and get it out onto the shelves at a price that's competitive against Malaysia and Indonesia.'
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