As published by Chain Reaction Research,
Meteorological data may demonstrate that environmental conditions such as seasonal water and sunlight deficits are hindering West African palm oil production yields, in comparison to SE Asian yields.
According to the International Finance Corporation, the U.N. Food and Agriculture Organization and Ghana Oil Palm Development Company Limited, commercial plantations in Ghana achieve yields around 14 metric tons per ha while Indonesian yields often exceed 28 metric tons or more per ha.
Studies suggest that to achieve optimal growth and yield, oil palm trees require:
- Consistent daily solar radiation for five to seven hours of at least 15 megajoules per square meter.
- Evenly distributed annual rainfall, without a marked dry season, of 2,000 to 2,500 millimeters.
Ghana currently has 305,758 ha planted in oil palm trees that produce 243,852 tons of crude palm oil annually.
Possible Seasonal Solar Radiation Deficit
Recent meteorological observations may explain this seasonal deficit in solar radiation. The reason, based on both satellite and ground-based observations, is that “summertime southern West Africa is frequently affected by an extended cover of shallow, non-precipitating clouds only few hundred meters above the ground. These clouds are associated with nocturnal low-level wind speed maxima and frequently persist into the day, considerably reducing surface solar radiation.”
Similarly, as shown below in Figure 1, Satellite Digital Audio Radio data from NASA measuring sunlight between June to November in five separate locations within Sierra Leone, Ivory Coast, Cameroon, Benin, and Nigeria found that these five locations experienced roughly 55% of the average monthly sunlight compared to three separate locations in Indonesia and Malaysia.
|Monthly Average: December to May||Monthly Average:|
June to November
|Indonesia and Malaysia||6.4||6.3||98%|
|Sierra Leone, Ivory Coast, Cameroon, Benin, and Nigeria||5.8||3.5||60%|
Figure 1: Monthly Average Sunlight Comparisons West Africa to SE Asia
Possible Seasonal Water Deficit
Data also suggests, as shown below in Figure 2 in red, monthly soil moisture deficits – a function of rainfall and other hydrological processes – are occurring.
Figure 2: 1977 – 2008 Monthly Water Deficits, Ghana Oil Palm Development Company
Possible Impacts on Investments
Seasonal crude palm oil yield deficits may have specific financial impacts for investments in West Africa. These impacts include:
- Potential increase in seasonal and migrant labor
- Higher fixed costs for crude palm oil refining given seasonal decrease in mill utilization
- Other impacts
This means that for investments in West Africa to be profitable, West African nations may need to maintain current corporate tax holidays, high fixed domestic palm oil prices, and high import tariffs and duties imposed on edible oil imports. Finally, economies of scale may not be realized for investments in mill and plantation infrastructure.
Article by Gabriel Thoumi