Anatomy of a sector

The Economics of Oil Palm, by H.A.J. Moll. Economics of Crops in Developing Countries No. 2, Pudoc, Wageningen, 1987, 288 pp.

This book results from a research project aimed at a better understanding of the economics of tropical crop production mounted by the Department of Economics, Agricultural University, Wageningen, the Netherlands. A monograph on the subject of coffee appeared in 1986; this on oil palm is the second, and studies on maize and cotton are planned.

Moll's stated objective is to describe and analyze the oil-palm sector in a representative group of countries and the role of the commodity within each nation's economy. The microeconomics of production, processing, and marketing, as well as the macroeconomics of the respective oil-palm sectors, are given emphasis.

The book is organized in two parts, the first composed of two chapters, the second devoted to eight case studies. The introductory chapter reviews the current status of cultivation of the African oil palm (Elaeis guineensis) and of its products on a general world scale. Succinctly touched upon are the ecological requirements of the palm, fruit bunch production, processing of palm oil and kernel oil, and the international production and trade of oil-palm products as related to the global economy of fats and oils. Nineteen tables complement the text.

Chapter two, "Comparative Analysis", the core of the book, provides an explanation of the economic analysis employed to compare case studies from Indonesia, Malaysia, Cameroon, Cd'Ivoire, Nigeria, Sierra Leone, Colombia, and Honduras, representative countries of the three major production regions, Southeast Asia, West Africa, and Latin America. Ecological conditions of oil palm and alternative crops are examined. Production is discussed in terms of three major systems, subdivided into five types of producers: estates (state and private); smallholders cultivating pure stands of improved palms (integrated and independent); smallholders deriving fruits from semi-wild stands. Data clearly show that the first two production systems have become dominant over the past 25 years. In the discussion of processing and marketing, most notable is the increasing export of processed over crude palm oil, as the producing countries upgrade facilities and expand capacity. As a result, the direction of trade is undergoing significant changes. Attention is given to the fact that in order to be domestically successful and internationally competitive the oil palm industry requires a variety of supporting services provided by governments and/or private organizations. Malaysia's world dominance as a producer and exporter is directly attributable to such services. The chapter ends by comparing production costs, domestic and international market prices, and foreign exchange in the eight countries. Because data were unavailable, Nigeria and Sierra Leone are omitted from the analysis of production costs and returns.

The detailed case studies of the second part are comprehensive and furnish an excellent summary of the individual oil-palm sectors. Each follows a prescribed outline detailing the background, ecology, oil-palm sector, production of oil and kernels, processing, marketing, supporting services, and, finally, economic parameters. A map of production areas, a diagram showing the organization of the oil-palm sector, and numerous tables are provided.

Long needed. The organization of the book is not entirely satisfactory. It is unusual to find the comparative analysis before the case studies on which it is based. As it stands, the final case study on Honduras ends the book rather abruptly. The organization would have benefited from a shorter chapter to introduce the case studies and the addition of a final chapter to present the general analysis and conclusions. Second, placing the references in a combined bibliography at the end of the book would have avoided repetition of standard FAO and World Bank sources used in nearly every chapter.

Minor shortcomings of an editorial nature are also to be found. Chapter references include some works not cited in the text. The case study chapters contain tables of economic parameters, currency equivalents, and price indices which are neither numbered nor referred to in the text, as is the case with all other tables. Also, sources are missing from several tables. The book has no index.

The text is clearly written, but there are a few misleading sentences or minor factual errors. For example, it is stated (p. 22) that "The American oil palm, Elaeis oleifera, is another species in the genus Elaeis," and that it "could become useful for breeding purposes." In fact, it is the only other species, and currently is being used to breed for disease resistance. On p. 215, the statement is made that the West African Institute for Oil Palm Research was established in 1938. However, WAIFOR only came into existence in 1952, having been developed out of the former Oil Palm Research Station, an experiment station of the Agricultural Department of Nigeria which was started in 1939. To be sure, these are minor matters and do not detract from the economic analysis.

Although the book claims to refer to the oil palm situation in 1982, this is not quite accurate. The author must have been aware of the important body of new information generated by two international conferences held in Malaysia in June 1981.

The oil palm has become one of the most successful tropical tree crops of the twentieth century. A comprehensive economic study of this crop has long been needed. Despite the misgivings expressed above, The Economics of Oil Palm fills this need and I do recommend it.

Dennis V. Johnson