Cocoa exports from Indonesia, the world's No.3 producer, may fall as much as 12.5 percent this year due to wet weather hitting output.

Exports are set to drop further in 2012 on rising domestic consumption, the Indonesian Cocoa Association said on Wednesday

Cocoa exports from Southeast Asia's largest economy will be between 280,000 tonnes and 300,000 tonnes this year, down from 320,000 tonnes in 2010, Zulhefi Sikumbang, chairman of an association known as Askindo, told a news conference.

Indonesian production will be flat at about 600,000 tonnes this year, as increased output from new planting offsets the impact of heavy rains, Askindo said last month.

The Indonesian government slapped an export tax for the first time on locally grown cocoa beans in April last year, in an effort to encourage the retention of fermented beans for local refining to gain a premium in international markets.      

"We predict that in 2012, cocoa exports will decline further to only 200,000 tonnes because of increasing domestic consumption after the government imposed its export tax last April."     

Grinders in Indonesia processed about 180,000 tonnes of cocoa beans last year, well below total grinding capacity of 345,000 tonnes, the Indonesian Cocoa Industry Association said this month.

Three local grinders also plan to expand capacity because they can now get more beans as a result of the tax.

"Domestic consumption will be increasing from 150,000 tonnes last year to become 220,000 tonnes in 2011," Sikumbang said.

This was mostly due to Guan Chong's new cocoa grinder in Batam island, off Sumatra, which opened in March, with a capacity for 70,000 tonnes per year, he added.

Indonesia currently has 1.5 million hectares of cocoa plantations, mostly in Sulawesi island in eastern Indonesia, with 10,000-20,000 hectares of additional production due this year.

Often regarded as a cheap source of low-grade cocoa, Indonesia has embarked on a series of programmes to improve quality, but faces serious obstacles including disease and a switch to alternative crops such as palm oil. - Reuters