Analysis of economic efficiency in cocoa production in Ghana

Abstract

The main purpose of this study was to analyze the economic efficiency of resource utilization in cocoa production of the cocoa farmers in Ghana to provide information for effective application and management of farm inputs on cocoa farms and policy recommendation. A random sample of 300 farmers in the Eastern, Ashanti, Brong-Ahafo, Central, Volta and Western regions of Ghana were selected, using the multistagesampling approach. Individual farmers were interviewed by usingquestionnaires. Descriptive and inferential analyses of the survey data were performed. Regression analysis was employed to estimate the Cobb-Douglas production function from the farm data for the measurement of technical efficiency of the cocoa farmers. The estimated elasticity from the production function and prices of input and output were subsequently used to calculate the measures of allotmentefficiency of resource use by the farmers. The coefficients for household size, cocoa farm size, quantity of insecticides, quantity of fungicides, and quantity of fertilizer were 0.261, 0.514, 0.273, 0.090 and 0.325, respectively. The quantity of fertilizer applied to the cocoa farm had the highest marginal physical product (133.11 kg/ bag), and that of quantity of fungicides variable (1.39 kg/satchet) was lowest. Householdsize, farm size, insecticides, fungicides and fertilizer were found to have statistically significant impact on cocoa output. The sum of elasticities of the factors included in the Cobb-Douglas production function was 1.463, which was more than one, implying that the cocoa farmers were operating in the increasing returns to scale. There were incidences of inefficiencies in the management of resources in cocoa cultivation by cocoa farmers since some resources were underutilized and others over-utilized.Farmers are advised to increase the use of household members, insecticides, fungicides and fertilizer while reducing the use of forest land through increased land productivity instead of land expansion to ensure efficient use of resource in cocoa production. However, the environmental impacts of these farm activities should be assessed to ensure sustainable cocoa production.