Palm oil is viscous oil extracted from the palm kernel fruit. Palm trees are common in West African countries and parts of Asia. It is consumed in meals, used for frying and other industrial applications.
The yellowish red oil attracts a huge market in Asia and West African countries. Entrepreneurs interested in palm oil business need to decide on the business template.
Palm oil business is divided into three major sectors. The first is growing the palm, processing the palm kernel and trading the product. The business model you choose depends on your area of interest and funds.
Owning and processing the kernel are capital intensive in comparison with trading palm oil.
Understand the Challenges
To process palm oil you need to understand the production process. Other things to learn are the different types of machinery used in the production process.
Learn how to process palm kernels through books, journals and manuscripts. Hire an expert to train your staff and learn the process. Other methods include attending seminars or workshops.
You can visit a local processing plant to see what your competitors are doing. Learn the different sets of skills in the production process and type of machinery.
Advantages of Palm Oil
Palm oil business is lucrative because of the huge market and demand. The oil also has a long shelf life, low cholesterol and lots of vitamin E. Palm oil is a good substitute to vegetable oil, attract cheap price, abundant and has lots of industrial applications. Palm oil is used to produce biscuits, margarine and soap.
How to Start a Palm Oil Processing Plant
Once you understand the challenges you need to secure funds. Other things you need are company registration, equipment, labor costs and location. You need to write a business plan and produce a feasibility study.
You need capital to buy equipment and lease factory space. The amount needed is for fixed and working capital for the startup enterprise.
Secure loans from commercial banks in your area. Provide your account manager the business plan and feasibility study.
You need collateral and ¼ of the startup amount. The constitution of your management team and experience will improve your chances of getting the loan.
Locate the Palm Oil Processing Plant
The most ideal location is in remote or rural areas. Closeness to a palm plantation is also a good advantage.
Easy access to raw material, good road network and electricity are other parameters. Another ideal location is close to a palm oil market.
Equipment for Palm Oil Processing
To run your oil processing plant you need these equipment's. The machinery needed is boilers, palm fruit strippers and mechanical screw press. Some more equipment’s are storage barrels, tanks, nut fiber separator and pound machine.
List of equipment
Mechanical screw press
Palm fruit stripper
Once you have the correct equipment setup your processing plant.
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You need qualified staff to run the equipment. Hire skilled operators conversant with the mechanism of the machines.
Hire a truck driver to convey your palm filled barrels and you need administrative staff. You need security, accounting and casual labor workers.
There are a number of challenges you face in the business. The main difficulty is securing funding and hiring skilled staff.
Others are high transportation costs, fluctuating palm oil prices and pollution. Power, operational costs, remote location and amenities are sometimes issues.
How to Trade Palm Oil
If you don’t have enough money to own a palm oil processing factory try buying and selling the finished product. The capital requirements are moderate and easy to achieve.
The major aspects of trading palm oil are a good storage facility and sourcing the product. Lease a shop in a market and store your palm oil barrels.
Buy directly from processing plants or major wholesalers.
The Supply Chain
Palm oil producers sell to wholesalers while wholesalers sell to retailers. The retailers sell to individuals, boarding houses, hotels, restaurants and market women.
Promote the enterprise through print media such as flyers, signboards and business cards.