The Palm Kernel Oil extracting business is primarily a raw material processing business. This is so because the end product is still a raw material for the big refineries that use it to produce edible Vegetable oil.
The basic raw material in this industry is palm kernel and finished products are palm kernel oil (PKO) Palm Kernel Cake (PKC) and sludge. The palm kernel oil is the main output of any palm kernel oil-expelling factory.
The Palm kernel oil (PKO) is the major raw material for the production of vegetable oil. 90% of what we call groundnut oil in our market is a vegetable oil made of palm kernel Oil (PKO). Again PKO is a major raw material for soap making companies. The Palm Kernel Cake (PKC) is a major by-product of a palm kernel oil expelling factory, palm kernel cake is used for producing animal feeds.
Most of the animal feeds such as chicken feed, pig/cow feeds, etc. are made with PKC. Sludge is a minor by-product which is used by people who produce black soap and other mechanized soap Industries. Some people also use it as fuel to start an open fire.
The business is an all-year-round business. The end product is in hot demand all-year-round, Because of the high demand producers do not stock finished products. Buyers always book for the products in advance. It is also sold on a cash-and-carry basis.
Sometimes buyers are even paying in advance in other to secure an expected batch of products. Prices of the product i.e. (PKO and PKC) are elastic or fluctuate up and down, depending on the season of the year. However the prices of the raw materials i.e. Palm kernel also fluctuate along with the finished product (PKO).
Thus, if the price of the PKO falls the price of the palm kernel (PK) also falls and vice versa. A good strategist with adequate working capital can make a fortune if it takes advantage of these price movements.
The major threat to the business is a scarcity of palm kernel. If a factory lacks palm kernel it may not enjoy the period of rising prices. Another major problem is the irregular supply of electricity.
As a business, palm kernel oil extraction and processing offers an opportunity for millers to earn a steady income and also provide employment opportunities for a countless number of men and women. On a national scale, it also helps to reduce our dependence on other countries to meet our increasing food demand.
Major customers for palm kernel oil products in Nigeria are the makers of margarine, butter, mayonnaise, soaps, waxes and polish. Other customers include pharmaceutical companies, diary companies including makers of palm-based cheese, ice cream, filled milk, etc. Palm kernel oil is also a major ingredient in tin plating, lubricants and biodiesel.