Over the past weeks we have covered in detail a lot of agriculture business ideas; many of you loved it. In this post we will discuss palm oil processing and production. If you want to go one step further, I have a ready-made business plan to make things easier for you.
This business is so vast it would require a whole book to cover its entirety. In any case, I promise to give you the basic knowledge you will need to start your own palm oil processing and production business.
Nigerians are beginning to realize that the most reliable means of sustaining individual and national development at the moment is agriculture.
The businesses opportunities that lie in the agricultural sector are so enormous. For instance, you could chose to go into livestock rearing with a good number of livestock to choose from, or you could engage in crop production with hundreds of possible crops to cultivate.
The other side of agriculture production is processing – converting raw agricultural produce into its finished, consumer-ready form.
In palm business, you can make money from its production (farming), processing (making market-ready red oil) or both. Whichever you choose, I don’t need to tell you that palm oil dealers are dancing serious skelewu to the bank in this recession. Have you checked the price of red oil recently?
Why you should invest in palm oil processing and production
Palm oil is a multipurpose food ingredient used all over the world. During my undergraduate days at the university, i never considered myself fully stocked with foodstuff until I had red oil. With palm oil you can prepare any type food.
As such, the demand for the commodity is always high. I always took money to the woman who sold palm oil, and she always took money to her suppliers who would take money to the producers and, you get the drift.
- Palm oil is an important export commodity which has a high demand in Africa and even Europe. Africa produces just 5% of the world’s demand for palm oil. Leaving a large portion of production and exportation to Indonesia and Malaysia.
- Palm oil has many uses. Apart from cooking, it is used as raw material for industrial products such as; soap, bio-diesels, margarine, cosmetics, pharmaceuticals, lubricants, etc.
- Palm oil has a long shelf life. It can be stored for over one year without losing nutrition, taste or quality. You may have observed people buy red oil during one period of the year and sell in another period. This is good business.
- It has low cholesterol level, improves eyesight, contains vitamin E, and increases the body’s immunity to diseases.
- Palm kernel oil is also extracted from the palm kernel fruit. Therefore if you want to go into palm oil processing, you will also get a bonus for extracting palm kernel oil from the seeds which is equally important. No part of palm is wasted.
- The weather condition in Nigeria favors the growth and cultivation of palm trees.
Prospects in the palm oil production and processing business – different ways you can get involved in the palm value chain
The wonderful thing about going into palm oil business is, it embraces all entrepreneurs irrespective of their financial capacity. For instance, if you have limited finance, you could choose buying and reselling of palm oil.
With a bigger budget you could focus on cultivating the palm fruits, and with an even larger budget you can set up a palm oil processing plant. It’s entirely up to you – you could even combine the three.
1. BUYING AND SELLING OF PALM OIL
This aspect of the business involves buying palm oil from the producers and storing them until the price goes up.
Palm oil is usually produced between March – May. During this period the product is surplus and cheap. You can buy palm oil in any quantity from the millers at this time and store them up till the time when palm oil becomes scarce and the price goes up.
Selling the palm oil around September-December usually yields over a hundred percent interest. You could also buy in large quantities and store for export.
Alternatively, you could buy palm oil from the eastern part of the country where it is cheap and sell in the northern part.
2. SETTING UP A PALM OIL PLANTATION
This is another aspect of the palm oil business. If you have your eyes on long-term investment, this aspect will be perfect for you.
Starting an oil palm plantation is capital-intensive, but in the long run the returns are massive. Palm oil mills and sellers will depend on you to operate.
The south-eastern part of the country is filled with fertile land suitable for the growth of palm trees. In Nigeria, majority of the oil palm plantations are located in Abia, Anambra, Edo, Cross-River, Ondo, and Enugu.
After acquiring a land, the next step is to plant the palm seed. Look for a good variety of seed to plant; this will ensure fast growth and maximum yield. Some of the best varieties of palm seeds are the Dura and Pisifera variety.
Oil palm trees take about five years to mature but with a good variety, the yield is high and the market is ever-present.
3. SETTING UP A PALM OIL PROCESSING / MILLING PLANT
This involves extracting oil from the palm fruits. Extraction of oil can be done locally, however the process is usually time-consuming and very wasteful. A lager amount of oil is left un-extracted when using local methods of extraction. To get the most of the business, you will need to use mechanical method to extract the oil from the palm fruits.
Setting up a palm oil processing plant
GET A LOCATION
The first thing you will need to do is to get a good location to set up your processing plant. It is best to locate your plant close to oil palm plantations, doing this will drastically reduce the cost of transporting the palm fruits from the farm to the processing plant.
ACQUIRE THE NECESSARY EQUIPMENT
Setting up a processing plant is fairly expensive, but equally profitable. There are a lot of equipment/machineries that are used to extract the oil from the palm fruits.
To reduce cost of setting up the plant, I suggest you approach local fabricators who construct these machines at a relatively low price.
A detailed list of the machines you will need, what they cost and where to get them from is included in the business plan I prepared for this business.
These machines are used to crush and squeeze the palm fruit, extracting all the oil it contains. The palm kernel seeds are also processed to extract palm kernel oil. After extracting the palm oil, you will need storage tanks to store them in.
Palm oil processing is a very labor intensive business. You would need to employ the services of professionals to install and operate the various machinery.
YOU WILL NEED A BUSINESS PLAN
To take on the palm oil processing business, you will need a business plan. A business plan will show you know what you are talking about, it is required if you must apply for grants/loans and it will provide a cost breakdown for starting the business.
Not to worry, I come prepared. I have a ready-made business plan for those who are serious about starting the palm oil processing business.
The palm oil processing business plan will walk you through every step of starting this business. It comes with a fully prepared financial analysis, plus it makes it very easy for you to enter your figures and recalculate the whole thing without stress.
CHALLENGES ASSOCIATED WITH THE BUSINESS
- It is capital-intensive. Especially if you plan to go into oil palm plantation or palm oil processing business.
- Investing in an oil palm plantation takes time before the profits start coming in. A palm tree requires at least five years before it matures and starts producing. After it matures it produces palm fruits yearly.
- Adequate storage facilities need to be provided for the palm oil. This can be sometimes challenging especially when you have limited funds.
Your options to raise capital for this business will vary depending on which way you want to go.
To start palm oil dealership, you can basically start with any amount you have. The way I see it, you may not want to borrow money to buy kegs of palm oil and sell. You can raise this money yourself if you put in a little work.
To start a plantation or a processing plant, it also helps to have your own but due to the cost intensive nature of the business, you may want to apply for grants and loans. You can also seek and possibly attract investment from individuals.
There are many lucrative agricultural businesses to invest in. in my opinion, palm oil processing and production sits at the top for profitability. You can get involved no matter the level of capital at your disposal. There is always something you can make out of it.
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