An export tax was introduced on Indonesian cocoa beans in 2010 to guarantee domestic supply for processing. This reduced cocoa bean exports by 51.4 per cent and increased processed cocoa exports by between 11.3 and 224 per cent. To assess the impact of this export tax on cocoa farmers and the supply chain, surveys were conducted with 60 farmers in South Sulawesi and various supply chain participants. A qualitative approach was used to analyse the cocoa supply chain from farmers to exporters or processors, and quantitative analysis for analysing the marketing system, efficiency analysis and price linkage. Results indicate that farmers' price is determined by the international price due to their higher bargaining power. It is the exporter that has a reduced margin or price differential following increased processing capacity and competition between exporters and processors for available beans. The study identified three marketing channels: farmers selling wet cocoa beans for cocoa processing; farmer's groups fermenting cocoa beans and then selling as providing the highest return to farmers; and farmer's selling dried beans to local traders.
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SEADI Discussion Paper Series. USAID