Value Chain analysis; Kenya, 2008
Palm oil is edible oil derived from the fruits of palm trees. It is the world's second major vegetable oil (after soybean). According to Hamburg-based Oil World trade journal, in 2008, global production of oils and fats stood at 160 million tons. The annual demand, of edible oils in Kenya is estimated at 380,000 metric tons.  Out of this, 126,667 tons are produced annually. The rest is imported at a cost of US$140 million a year, making edible oil the country's second most important import after petroleum. Food and Agriculture Organization of the United Nations (FAO). Palm oil in Kenya is grown in western province.

Palms are ready for harvesting 38 months and annual yields from mature trees are around 20 tons per hectare of fresh fruit bunches. Studies suggest that, over the next 10 years, large-scale producers could plant as many as 20,000 palms.

Uses

Palm oil is used as cooking oil.
Palm oil is high in vitamin E and A (carotene). It is commonly used in West Africa in different recipes. FAO.
Palm oil is a common cooking ingredient in the tropical belt of Africa, Southeast Asia and parts of Brazil.
Palm oil, like other vegetable oils, can be used to create biodiesel (substitute of diesel fuel made from organic products).

Economic benefits

Profits from palm oil have been used to finance Magbenteh hospital in Makeni, Sierra Leone.
The UN Food and Agriculture Organization’s hybrid oil palm project in Western Kenya, which improves incomes and diets of local populations.
Different vegetable oil producers have deliberated on Sustainable Palm Oil production. In 2008 Unilever, committed to use only palm oil to produce vegetable oil.

Challenges facing palm oil production

Local farmers in Kenya face competition from Uganda.
To compete, FAO has implemented a series of projects in Cameroon, Ethiopia, Kenya, Malawi and Zambia. The projects facilitate access to processing, storage, handling and reliable, trading information.
FCI, in conjunction with Kenya Agricultural Productivity Programme (KAPP), conducted a study in Western Kenya to analyze demand, assesses market trends and determines market opportunities and threats in palm oil production.
It was found that, though vibrant, palm oil production in Kenya is majorly for import. The local production systems have been neglected.
The study revealed that there are emerging oil markets in Africa, for instance the EAC, and COMESA. 
It was proposed that:
Partnerships be formed with farmers’ representatives, development organizations, Ministry of Agriculture and the private sector.
Formal supply contracts be formed that bind farmers and processors.
Farmers be evolved into business units with capacity to bulk, grade, store and supply consistently.
Farmers be encouraged and facilitated to fully adopt palm oil production as an income generating venture for local communities.
Government intervenes by repairing substandard roads in production sites to facilitate transportation.
Farmers be allowed to import palm oil seedling and equipment free of duty.
If successful, the sub sector would create employment for many Kenyans and improve the country’s balance of payment.