The issue that most people have in their plans for business is how to do a profitable palm oil business. In people’s attempts to take risk and do any business, they consider going into palm oil business. Palm oil is an agricultural or food product produced from palm trees and is widely consumed as part of meals in Africa especially in Nigeria. Thus, if your intention is to get into palm oil business, you likely have 75% chances of breaking even or making it through with palm oil.
Palm oil is a product that is not only used in the preparation of food, it is also used in factory settings in some places as ingredients in production of articles like soap and also grease. However, our focus is not on the idea of palm oil as grease and factory ingredients, our focus is on palm oil as a food product and how you can maximize the large market that depends on it to make profit. The important aspect of this business is that you can deal in it in various levels–as producer, as distributors and as a retailers.
Frequently Asked Questions about Palm Oil Business
1. What are the different levels or ways to enter palm oil business?
As illustrated above, you can get into palm oil business at different levels–there is the producer level, there is the distributor level and there is the retailing level. The producer level is you coming in as a farm owner or palm trees owner; regarding this, you manage the trees, harvest the palm nuts and prepare it for the distributors. The distributors are like the middle men; they purchase the processed palm oil and sell to the retailers. The retailers sell to the consumers. All levels of this business are profitable.
2. How much is needed to start a palm oil business?
This can be ascertained by knowing the level of the business the individual wants to enter. For producer level, in order to make good gain, at least a large land like three hectares is needed, and a large workforce, quality seedlings, manure/fertilizer and relevant equipment are needed running into at least 25 million naira ($61,000). The yield of the farm will grow as the farm ages.
For distributor level, what is needed is just capital and access to market, and then if you are buoyant enough, you can get a bus for the distribution. Money needed is 1 million naira ($ 2,444) and above for good profit. Palm oil, too, can also be stored.
For retailing level, once the person has an accommodation where he or she can sell the products, what’s needed is not more than 200K naira ($ 488) for the business.
3. How risky is palm oil business?
The risk in palm oil business is low. It is very low compared to the volatile nature of some agricultural products and farming. Palm oil doesn’t spoil for more than a year or more. It is also highly consumed so there is no way you won’t see buyers and markets for it. The risk level is low and you sure want to try it out.
4. Can palm oil be exported?
Yes. Palm oil can be exported. In fact, Nigeria used to be the highest exporter of palm oil before crude oil was discovered. As an international commodity, palm oil is well priced and you can make a lot of money exporting it outside Africa to Europe, the United States and Canada.
5. Can palm oil be stored?
Yes. Palm oil can be stored and its another business that exists with the larger palm oil business. You buy the products when it is cheap around March to May and sell when it is scarce around September to December. Palm oil sells well during festive seasons like Christmas and Sallah.
Factors and Processes to consider on How to do Profitable Palm Oil Business
Capital: This is the first thing to consider while planning on doing profitable palm oil business; you should have good amount of money and plan on how to utilize it in doing the business. Ask experts in the business and know if the fund you have is enough to start. We have already given our own estimation of what you might be needing.
Knowledge and Expertise: You would need to undergo the training of learning the ways of the business to be able to make gain if you enter and avoid loss. Once you have learned the way and process, you are certain you won’t be scared of losing. Palm oil business is surely profitable.
Good Palm Tree Species: Good palm tree specie is one of the best ways on how to do profitable palm oil business. If you are planting or planning to have a palm tree plantation, endeavor to plant good species. Ask experts in the field and know the best species that suits your soil type. In a nutshell, you should choose a specie that produces good and enough oil and that is fertile.
Survey your Target Market: Just like in any other agro business, before you go into palm oil business you should know and have your target market. Create a list or contacts and constantly reach out to them. It is this your target market that would readily buy your products once it is ready, be it at producer level or distributor level or even retail.
Stance against Bad Business Ethics: You should learn how to always satisfy your customers and give them good and unadulterated products. If you ever process and produce palm oil that is not original, the customers blacklist you. Even when you are a distributor, you should ensure you distribute authentic palm oil so as not to lose customers.
How Profitable is Palm Oil Business?
On doing any business or on know how to do a profitable palm oil business, what most people consider firstly is how profitable is? Well. Palm oil is a very profitable business and we would be explaining how profitable it is here.
Let’s say you invest 1 million naira in distribution of the products. You go to places where palm oil is cheap in Nigeria, for instance, to buy and carry it to sell in places they are costly. These places include Ondo State, Nsukka in Enugu State, Imo State, Edo State, Abia State and Rivers State. You can buy 80 gallons for like 9,000 naira each and 100,000 naira for transport at the cheapest time to sell in places like Abuja, Lagos, Kano and Kaduna for 11,000 – 13,000 naira a gallon.
Your gain is 50,000 to 100,000 naira per completed sale.
In another instance you can use 200,000 naira to buy palm oil in large quantity like 20 gallons when it is cheap and begin to sell at retail price in a moving location. When there is no scarcity, you can make 3000 on every gallon but if there is scarcity, you can make up to 10,000 on every gallon sold. 10,000 X 20 gives you 100% gain in it.
Another good option to make money in palm oil is in the storage. If you buy when it is cheap and sell when it is scarce and costly you can make 40% to 100% gain depending on the level of scarcity that year.
Then if you have the plantation, you can be making as high as 1 million naira annually per hectare as sales. This is why it is advisable to do it in a large scale.
Thus so far we have traced the good steps on how to do a profitable palm oil business, especially in Nigeria. If you follow these steps and processes and adhere to them, you are sure to make good gain. Palm oil business is indeed profitable.