Buffer Stock Operations and Well-Being: The Case of Smallholder Farmers in Ghana

Emmanuel Abokyi,Kofi Fred Asiedu,Dirk Strijker,Michiel N Daams

doi:10.1007/s10902-021-00391-4

Abstract

This study investigates the possible causal relationship between buffer stock operations in Ghanaian agriculture and the well-being of smallholder farmers in a developing world setting. We analyze the differences in the objective and subjective well-being of smallholder farmers who do or do not participate in a buffer stock price stabilization policy initiative, using self-reported assessments of 507 farmers. We adopt a two-stage least square instrumental variable estimation to account for possible endogeneity. Our results provide evidence that participation in buffer stock operations improves the objective and subjective well-being of smallholder farmers by 20% and 15%, respectively. Also, with estimated coefficient of 1.033, we find a significant and robust relationship between objective well-being and subjective well-being among smallholder farmers. This relationship implies that improving objective well-being enhances the subjective well-being of the farmers. We also find that the activities of intermediaries decrease both the objective and subjective well-being of farmers. This study demonstrates that economic, social, and environmental aspects of agricultural life could constitute priorities for public policy in improving well-being, given their strong correlation with the well-being of farmers. Based on the results of this study, we provide a better understanding, which may aid policy-makers, that public buffer stockholding operations policy is a viable tool for improving the well-being of smallholder farmers in a developing country.

Highlights

An agricultural policy that has drawn attention in sub-Saharan African countries in recent years is the buffer stock operations (BSO)
This means that differences in the objective well-being (OWB) and subjective well-being (SWB) between the National Food Buffer Stock Company (NAFCO) and the non-NAFCO farmers are likely due to their participation in the buffer stock operations
To assess whether differences in OWB or SWB between NAFCO and non-NAFCO participants are due to participation in buffer stock operations, we turn to regression model results

Summary

Introduction

An agricultural policy that has drawn attention in sub-Saharan African countries in recent years is the buffer stock operations (BSO). Abokyi et al (2020) observed that larger buffer stockholdings usually permit a longer period of stable prices, but at costs that rise exponentially over time, while smaller stocks imply that prices fluctuate more with substantial cost savings. The application of this type of initiative in most countries is to improve producers’ incomes and well-being. In the buffer stock operation system, as applied in Ghana, a dual pricing mechanism is used This pricing mechanism involves setting up floor and ceiling prices (Abokyi et al, 2018). Licensed buying agents (LBAs) purchase the cereals for NAFCO at the farm gate for the floor price, providing farmers access to efficient markets devoid of intermediaries’ activities, mitigating asymmetric information problems (see Abokyi et al, 2018)

Methods

Results

Conclusion