INOCAS: improving pasture management with integration of native cerrado palm trees to generate sustainable vegetable oil

In Brazil the growing demand for palm oil has resulted in rising import costs and large tracts of forested land being cleared for monoculture palm plantations, generally using the African palm tree species. This expansion of predominantly monoculture systems negatively impacts the environment by causing land degradation and deforestation. The macaúba palm tree, in contrast, causes no degradation or deforestation as it is native to Brazil and can be planted in agroforestry systems on existing pastures without reducing yields, and also providing shade for cattle on the pastures. For these reasons and more, we believe that Inocas – the Brazilian start-up implementing the macaúba rollout in Brazil – is pioneering a transformational new and sustainable alternative to traditional monoculture palm plantations.

Inocas will train smallholder cattle farmers to harvest macaúba plants on their land, who will then receive payments for their labour during harvests and for the Macaúba fruits grown on their land. Inocas will plant macaúba palms more extensively on their pastures throughout the Cerrado, in such a way as to not reduce the yield of pastures used for cattle grazing. Even though Macaúba naturally flourishes in the Cerrado and can be integrated into such agroforestry systems, it remains largely unexplored. This is because it has lacked a structured commercial value chain. This is something that Inocas intends to change: it will process the macaúba fruit into plant oil, animal feed and a dense biomass granulate, and sell them to the growing palm oil market and other national industries in Brazil.

Inocas can produce enough palm oil to sustainably meet rising domestic and global demand without any additional forest clearing or land degradation. A third of the area of the region of Alto Paranaíba, Minas Gerais (where the project is located) would be sufficient to substitute the entire internal demand for imports of palm oil in Brazil. The long-term macaúba production potential in Brazil exceeds current global palm oil production volume by far and could therefore become a sustainable way of meeting a large proportion of the global demand. Put another way, if this market can be proven it could dramatically disrupt the global palm oil market and be scaled nationally and globally.

This project is based in an area with high seasonal unemployment and low incomes for smallholder farmers and agricultural labourers.  The project will increase the incomes of both labourers and farmers by providing employment during the current agricultural down season (since the macaúba harvest season is different to the coffee harvest season, the main crop grown in the region) as well as in the oil mill and the associated service sectors (transport, etc.). It is also expected to sequester around 600,000 tonnes of CO2, avoid emissions from deforestation and reduce pressure on a region suffering from higher deforestation rates than the Amazon average.

Althelia is providing a bridge loan to Inocas to kick-start the 2016 harvest season, and advising the Multilateral Investment Fund (MIF) of the Inter-American Development Bank on a planned equity investment in order to implement the first phase of the project: organising the value chain for the macaúba palm fruit, transformation and commercialisation of the oils and other products (e.g. press cake), as well as planting 2,000 hectares of macaúba palm trees on smallholder pastures. The ultimate aim is to reach commercial viability, at scale, so that macaúba becomes a credible deforestation-free alternative to African palm oil monocultures.

Althelia Funds