Business Opportunities

Oil Palm

Commodity Profile

I. Introduction

Oil palm, scientifically known as Elaieis guineensis, is a tree that is native to West Africa. In the Philippines, it is planted mostly in Mindanao where agro-climatic conditions favor its growth. Current total area planted is around 16,600 hectares. Oil palm is the world’s most productive oil-producing plant, yielding about five tons of oil per hectare.

Palm oil and palm kernel oil are two different oils that can be extracted from the fruit of the oil palm. Ninety per cent of all palm oil produced is used for food purposes while the remaining ten per cent go into non-food applications. Although the volume is small in relation to that used for food, it is important since most of it is processed to products of higher value added. Generally, non-food uses of palm oil products include: fuel (or diesel substitute); as raw material for soaps and detergents; as raw material for oleochemicals, fatty acids, fatty nitrogen compounds and glycerol for the manufacture of cosmetics, pharmaceuticals, household and industrial products.

II. Market Situationer

World Market

World production of the major edible oils grew at an average rate of 3.6% over a ten year period. In 2000, soybean oil accounted for the biggest production share at 25.5 million MT, followed by palm oil at 21.7 million MT. However, palm oil is the largest traded oil accounting for 42% of the world’s exports, followed by soybean oil at 18.9%.

Domestic Market

Local crude palm oil production shows an increasing trend, with 2001 figure placed at 57,000 MT, up from the previous year level of 54,000 MT. At this production rate, the country continues to be import dependent with importation recorded at 46% of total domestic supply.

The major players of the local palm oil industry consist of: the Filipinas Palm Plantations Industries, Inc.; Agusan Plantations Inc.; and Kenram Philippines Incorporated. The three processors are all located in Mindanao, with an aggregate production capacity of 78 MT per hour.

Domestic demand for crude palm oil stood at 118,199 MT in 2000. If local demand is projected to grow at 5% per annum for the next eight years, demand will reach 150,856 MT in 2005 and 192,535 MT in 2010.

Market Prospects

Palm oil has bright prospects in the local and world markets. In the domestic scene, the use of palm oil to take the place of coconut oil is being pushed and thus connotes its accelerated use. Even if this plan does not materialize, the use of palm oil as import substitution strategy will call for the establishment of new plantation areas.

The demand for crude palm oil in the world market will stem from the growing need for oleochemicals. In the Asia Pacific Region, demand for oleochemicals is increasing annually at a rate range of 2% to 3%. (Malaysian Palm Oil Board, Internet Research) While the strategy is that of expanding production for the domestic market, the foreign market deserves to be considered, in light of the foregoing.

III. Cultural Requirements

A. Planting Materials

The variety of palm used is Tenera. Tenera seeds are imported from Papua New Guinea, but the seedlings are almost always available with the major players that go into out growers contract arrangement. Seedlings are ready for planting on the 10th to 14th month. The unit cost of the seedling is P75.00.

B. Agro-Climatic Requirements

Temperature : Roughly 22 to 32 degrees centigrade
Rainfall : Minimum of 30 inches or not less than 2000 mm, with fairly even distribution throughout the year
Sunlight : 5 hours per day or 2000 hours annually
Ideal Soil : Flat, heavy, water-retaining alluvial soil

C. Plant Density : 120 to 150 seedlings per hectare or 128 seedlings at a spacing of 9.5 meters

D. Cultural Management

D.1 Land Preparation

· under brushing/slashing of weeds and woody growths
· chainsaw felling
· pruning/burning/stacking/reburning

D.2 Lining, Holing & Planting

· lining at a spacing of 9.5 meters between each plant
· holing at 10 to 14 inches per hole to accommodate size of seedling bag
· planting to be done at the onset or during rainy season

D.3 Installation of Rat Nets

· rat nets needed to prevent possible damage that may be caused by rats
· rat nets installed around bulb of seedling using welded poultry wire with mesh size of 0.5 inch; bamboo stick used to clip the ends
· lower end of rat net is covered with soil and upper end is folded towards the plant to prevent entry of rats

D.4 Planting of Cover Crops

· leguminous cover crop planted to suppress growth of weeds, conserve moisture and enhance soil nutrient

D.5 Circle Weeding

· done to maximize effect of nutrient applied
· six rounds manual circle weeding prior to fertilizer application, at 3 feet to 6 feet from base of palm

D.6 Fertilization/Manuring of Plants

· broadcasting around base of the palm, within the circle weeding
· fertilizer application follows a schedule, dosage and type of fertilizer material and varies on a yearly basis

D.7 Pest and Disease Control

· rat baiting must be carried out if presence of rats is observed
· for bagworms and caterpillars, root infusion or power spraying (using Bacillus Thuringensis) should be carried out as soon as their presence in the field are detected

D.8 Harvesting

· will start on the 26th to 30th month after transplanting and will last till the 25th year
· average fresh fruit bunches yield per hectare over a 25 year period is 19.1 MT per year
· harvesting is done every 10 days or 3 times a month

IV. Financial Aspect

Cost and Return Analysis per Hectare

Seedlings 670.00
Inputs 7,698.52
Labor 3,431.14
Transport Cost 134.00
Contingencies 250.66
Development Cost 766.67

Sub-Total 12,950.99

Interest Expense 11,866.33

Ave. Total Cost 24,817.32

Ave. Returns 56,403.85
Ave. Net Income 31,586.53
Ave. Net Profit Margin 0.56

Costs reflected are averages over a 15-year projection period.

Directory of Contract Growers/Processors

NAME ADDRESS/TEL. # CONTACT PERSON

Filipinas Palmoil 2/F APPI Bldg. Mr. Rolando A. Dazo
Plantations Inc. 92 Rodriguez Jr. Ave. Financial Controller
Libis, Quezon City
Tel: 2 – 6318496/97

Agumil Phil. Trento, Agusan del Sur Mr. Alberto P. Itucas
Inc. CP #: 09194446604 Plantation Manager

for further info visit: Landbank of the Philippines web site