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BOGOR, Indonesia — For generations, villagers in Cameroon have been pounding the bright orange fruits of the oil palm to release the strongly flavored red oil — a key ingredient of local cuisine.
Now, many communities have mechanized this process, using artisanal mills powered by car or motorbike engines — mills that are so profitable, the Cameroonian government is considering banning them.
Why? It’s a story of paradoxes — and prices, of course — that is explored in a new paper by Raymond Nkongho and other scientists from the Center for International Forestry Research (CIFOR).
Globally known for its vast plantations in Malaysia and Indonesia, the oil palm originates in the Gulf of Guinea and has been used by West and Central African communities for centuries to make oil, wine, roofing and building materials, and medicines.
More recently, industrial plantations and mills were developed in Cameroon, and in the 1990s when the prices of coffee and cocoa crashed, many smallholders planted oil palm instead. Downstream businesses that refine the oil and turn it into soap and cosmetics are thriving.
But now, in the home of palm oil, demand exceeds supply, and the country, like others in the region, has to import the substance from Southeast Asia.
“In this setting of not enough oil for local needs, you’ve had for the last 15 to 20 years a huge development of artisanal milling,” said Patrice Levang, a senior scientist at CIFOR and a co-author of the paper.
Increasing numbers of smallholders are choosing to use artisanal mills to process their palm oil fruit rather than sell to the industrial mills, Levang said.
This is a huge frustration for the industry and the government, as the artisanal mills are highly inefficient, producing around one-third less oil. During the low production season, when companies can’t get enough palm oil fruit to run their factories, they lie idle.
Nkongho and Levang’s paper asks why smallholders prefer their home-grown, inefficient methods of producing palm oil — and finds that while they might get less oil from their palm oil crop, they get more money.
In an effort to keep the price of red oil low for consumers — and for the powerful local industries that buy the oil — the Cameroonian government sets the price of the palm oil that comes out of the factories. Companies then pay local people fixed, low rates for their fruit.
But if smallholders mill the oil themselves, they can sell it on the informal market, where prices are unrestricted, Levang said.
“Especially during the low season, when oil is scarce, the prices go very high,” he said. “They can go nearly twice as high as the official price, and this is where they really make money.”
Farmers and traders can also get cash on delivery at the local artisanal mill, whereas if they take their palm oil fruit to an industrial mill, it can be weeks or months before they are paid.
The artisanal mills also provide important social benefits, the paper found.
They are a source of rural laboring jobs for young men — reducing the exodus to the cities. And although women are less involved in milling the more mechanized it becomes, they can make a good income as intermediaries, Levang said.
“For example, a widow who buys US$100 of palm oil fruit from a neighbor each week can go to the mill, mill it herself with the help of the workers there, and sell the oil for $100 profit,” he said.
“One hundred dollars profit a week is a nice income — locally it’s nearly twice what a secondary school teacher can get.”
“So it provides jobs and oil for local people as well, as it’s available on the local market — so this explains the success of the whole business.”
Oil palm plantation companies, though, consider the artisanal mills a threat, and have repeatedly appealed to the government to declare them illegal and close them down.
It is not just that they can’t get enough fruit to run their mills the whole year — they also suspect smallholders of stealing oil palm bunches from the company plantations and processing it in their artisanal mills, Levang said.
“When you look at the distribution of these artisanal mills, most of them are located close to the industrial mills and the big plantations,” he said. “So it probably does happen.”
Ecologically, the artisanal mills are “a nightmare,” he said.
They are hot, smoky, and can be unhygienic and unsafe. They produce waste products and effluent, which often end up in nearby streams. The quality of the oil is not controlled, and can be high in unhealthy fatty acids.
“There’s a reason they exist — but they are not a romantic solution to the problem,“ Levang said.
Crushing the mills and confiscating equipment — which has already been tried by the government in some regions — is not the answer either, Levang said, and would result in serious social problems.
Instead, he says the price incentive is what drives the proliferation of these artisanal mills, so that is what needs to be addressed.
“If the government liberalizes the price of oil, then in just a few months, most of these artisanal mills will disappear,” he said.
Levang said if there was a free market for palm oil fruit in Cameroon, smallholders would get more money the more oil they produced, so would turn to the most efficient mills — the industrial ones.
“Just give a better price to the producers and you will solve the problem.”