This note is part of the broader context of the intervention of the Foundation for Agriculture and Rurality in the World (FARM) on the challenges facing the Ivorian oil palm sector. Following, in particular, a study trip by the Ivorian interprofessional organization to France in 2018 and a debate organized during the Paris International Agricultural Show in February 2019, FARM carried out a mission to Côte d'Ivoire in May 2019, including both meetings with stakeholders in the sector and a forward-looking reflection workshop, aimed at developing, in a concerted manner, courses of action to address the multiple challenges facing the sector. This note summarizes the main conclusions.

1 – Seen from Europe: production at the heart of the fight against deforestation

European policies to combat imported deforestation are based on reservations about certain agricultural products, including palm oil, which contribute to the depletion of tropical forests. In fact, palm oil is one of the most controversial crops in the world with respect to environmental sustainability.

The debate tends to focus on oil imported from Southeast Asian countries. However, on the scale of Côte d'Ivoire and, more broadly, West Africa, the issue differs somewhat. First, the vast majority of African palm oil production is not exported to Europe but remains consumed, almost exclusively for food, in the sub-region. The issue is therefore not primarily one of imported deforestation, but rather a matter of local concern, knowing that the subject is far from anecdotal since three-quarters of the Ivorian forest has disappeared since the 1980s and that deforestation, although declining, continues at a rate close to 3 billion tons per year.^[1]. However, this observation in no way reduces the legitimacy of donors to support the fight against deforestation in Africa. In addition to the fact that tropical forests contribute to mitigating global climate change, palm oil offers enormous advantages, linked to its exceptional productivity per hectare.^[2], which helps to contain the expansion of cultivated areas and increase rural incomes.

Finally, it should be noted, and this is a paradox, that in Ivory Coast the production of palm oil contributes less to deforestation than that of rubber and cocoa, which are nevertheless subject to more environmental certifications and are exported en masse to Europe.

2 – A major sector in the Ivorian economy, with strong growth potential

The palm oil industry occupies a crucial place in West African economies for two reasons. First, and this is even more true in Côte d'Ivoire, because palm oil is one of the essential products in the household basket and its rising price constitutes a potential factor of social destabilization.

Furthermore, almost all palm oil is processed locally, by a well-structured sector that directly or indirectly supports nearly two million people in this country, or 10.% of the population, and exports 45.% of its production (in 2017) to the sub-region. In total, according to some estimates, the palm oil sector provides approximately 2.% of Côte d'Ivoire's gross domestic product.

This sector has a considerable advantage due to the expected sharp increase in national and sub-regional consumption of palm oil, mainly for food, since its other uses, particularly cosmetics, are still in their infancy.

In the main consuming countries of sub-Saharan Africa, demand is expected to increase by almost 50% by 2030, compared to 2017, and will not be able to be fully met by local production. Côte d'Ivoire therefore benefits from major commercial potential, targeting a clientele that is increasingly sourcing from Asian countries: Benin, for example, imported nearly half a billion dollars' worth of palm oil in 2017.^[3].

Realizing this potential, however, requires significantly increasing the productivity of smallholders, which is currently around 4.5 tonnes of fruit bunches per hectare according to official estimates – probably around 7 t/ha if self-consumption and the informal market are taken into account – compared to nearly 22 to 25 t/ha in agro-industrial plantations. Improving yields also depends on reducing rural poverty and improving the competitiveness of Ivorian production in the face of imported oils, and therefore the sector's ability to create jobs, a major challenge facing sub-Saharan Africa due to its population growth.^[4]Increasing productivity can also have positive environmental benefits by limiting cultivated areas, provided that they are accompanied by strict public regulations aimed at controlling deforestation.

3 – A sector at work facing challenges

The Ivorian oil palm industry is functional and well-structured. It relies on the complementarity of industrial production and village plantations, to varying degrees depending on the company. Within the framework of effective contractualization, it is this complementarity that enables the performance of manufacturers and, thus, of the industry as a whole.

The Interprofessional Association of Oil Palm (AIPH) is the linchpin. It brings together large industrial companies, which work with approximately 40,000 small planters, supervised by state-recognized cooperatives that are very active in collection, training, and track maintenance. These companies employ more than 21,000 people in primary and secondary processing. The AIPH promotes dialogue between all stakeholders in the industry to better coordinate its various links. It is also involved in setting prices paid to producers. It should be noted that such interprofessional structuring is exceptional in West Africa, especially for production intended for local markets and not for export to high-income countries.

While this dynamic is recognized by the players, numerous organizational flaws are hampering the sector's growth potential in the short term.

In light of the challenges of market growth, the sector must undertake a systemic transformation to improve its economic, social, and environmental performance. This transformation requires supporting smallholder farmers to encourage them to change their practices. However, while all the stakeholders we met seem aware of these challenges, they do not measure their acuteness with the same urgency or intensity. The sector must therefore accelerate its transformation, beyond the many initiatives already implemented, which represent steps towards greater sustainability.

The oldest manufacturers in the sector offer, sometimes in collaboration with donors and often with the support of NGOs, various actions in terms of training producers, targeted at improving their technical or economic performance, without forgetting the progressive integration of environmental certification and human issues relating in particular to child labor.

Three types of initiatives are generally carried out simultaneously: increasing the productivity of planters, through a modification of technical itineraries and the use of improved plant material; training and raising awareness among producers and their families about the problem of deforestation, particularly in light of climate change; finally, the distribution of tree seedlings, in particular for the demarcation of village plantations, which are often poorly demarcated.

4 – But a sector put to the test

The Ivorian oil palm industry is being severely tested by increased competition and the sharp drop in global vegetable oil prices recorded in recent years.

Low prices, which have been halved from their historic peak, threaten the sector's economic stability. In the short term, the sector is holding its own, thanks to an interprofessional price-smoothing mechanism implemented by manufacturers. But the viability of village plantations and cooperatives is being called into question, as many are operating at a loss.

This crisis is compounded by increased competition in the Ivorian market. Over the past ten years, it has seen the emergence of new industrial players, not all of whom are involved in the interprofessional organization.

The increased competition also results in less profitable prices for manufacturers, even though oils imported from Europe benefit from a better image among high-end consumers, while high value-added products are very rarely targeted by Ivorian manufacturers.

The disintegration of the sector is causing an explosion in the informal sector, which absorbs up to half of production in some regions. Apart from any environmental or health considerations (particularly concerning oils refined in artisanal workshops), this crisis has serious consequences for both cooperatives and the state budget, since tax is not levied on informal collection, while planters are deprived of a significant portion of the margin.

This dynamic is all the stronger given that most producers also cultivate rubber, in addition to cocoa and food crops (cassava, plantain, etc.), and that rubber is experiencing a crisis comparable to that of palm oil. A decline in palm cultivation in favor of cocoa, if proven, would be worrying.

5 – Ways out of the crisis

The future of the Ivorian palm industry depends on conquering the West African market and increasing commitments to economic, social and environmental sustainability.

One of the keys to getting out of the crisis, according to the planters, lies in adjusting the pricing mechanism to take into account an oil content in the bunches which, according to them, is approximately one point higher than that currently taken into account.

Improving economic performance and reducing informal collection are conditions sine qua non greater sustainability of agricultural sectors. In this perspective, the Ivorian sector must urgently resolve the issue of value sharing with small village planters and, to do this, put an end to the dynamics of informal competition exerted by "deliverers" vis-à-vis cooperatives. This is one of the missions assigned by the Ivorian State to the recently created rubber-oil palm council, at the risk of causing interference or even discrediting the interprofessional organization.

The State could, exceptionally, contribute by temporarily reducing tax levies on producers, to encourage them to sell an increasing proportion of their production in the formal sector.

Many technical solutions also need to be considered. It thus seems counterproductive that, in the same regions, the same producers, when cultivating rubber and oil palm, deal with different cooperatives for each of these crops. A grouping of these structures, if conducted with discernment, would allow for economies of scale and promote greater efficiency in the services provided to producers in terms of supervision, collection, training, or awareness of environmental issues.

Ultimately, it would be regrettable to contribute to weakening a sector that is aware of the path it has to take but is struggling to equip itself with the necessary resources to do so. This is why, on the European side, it would be appropriate to support the improvement of the sustainability of the palm sector, which can contribute to meeting the major challenges facing sub-Saharan Africa regarding poverty reduction, job creation and environmental protection.

Two major keys to change are closer contractualization between small planters and processing companies, allowing for improved coordination between stakeholders in the sector, and the development of certification, guaranteeing better environmental protection, in conjunction with the implementation of a much more effective forestry policy. However, these actions are costly and often difficult to implement due to the specificities of the African context. They must be technically and financially supported by international donors.

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[1] Source: FAO and Permanent Executive Secretariat REDD+, 2017, “Basic forest data for REDD+ in Côte d'Ivoire, mapping of forest dynamics from 1986 to 2015”, http://www.fao.org/3/a-i8047f.pdf

[2] The oil yield per hectare is, on average worldwide, five to ten times higher for palm than for other oilseeds.

[3] It is likely that a significant proportion of these imports are resold, probably after repackaging, in neighbouring countries.

[4] According to the United Nations, the population of the twelve sub-Saharan African countries listed in the US Department of Agriculture's international database is expected to increase by 395 million people, or about 40 million, between 2017 and 2030 (see Appendix 2 of the Note).