Farmgate versus market centre sales: a multi-crop approach

Benjamin Musah Abu,Haruna Issahaku,Paul Kwame Nkegbe

doi:10.1186/s40100-016-0065-6

Benjamin Musah Abu, Haruna Issahaku + Show 1 more

Open Access

https://doi.org/10.1186/s40100-016-0065-6

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Abstract

Smallholder farmers have two basic decisions to make regarding selling their surplus produce: selling at farmgate at low prices or travelling to a market centre where higher prices are offered while incurring some transaction costs. Whichever decision is made has implications for poverty alleviation efforts. Previous studies have ignored modelling participation and market choice simultaneously. Taking a multi-crop approach, this paper fills the gap by investigating the key determinants of market participation decisions of smallholder farmers in Ghana using the sample selectivity probit model in order to account for potential endogeneity and selectivity bias and thus obtain unbiased estimates. Household survey data in the Upper West region of Ghana for the 2011 production season are used to achieve the goal of the study. The results reveal that yields of maize and groundnut and market information are the simultaneous determinants of market participation decisions while age of the farmer, yields of the two crops, membership of farmer organisation and prices of the two crops simultaneously determine the choice of market. These imply that policies that enhance productivity of these smallholders and market information are vital in the drive for a commercially oriented agriculture. Also, the incentives to incur transaction costs to market centres to benefit from remunerative prices lie in measures to increase yields.

Highlights

It has been generally agreed that the way forward for smallholder farmers is increased market participation
Gender is a positive determinant of groundnut market participation, as we find that male farmers are 2.5 % more likely to participate in the groundnut market than female farmers, a result that contradicts that of Burke et al (2015)
This study examines market participation decisions of smallholder maize and groundnut farmers in the Upper West region of Ghana, employing a procedure that corrects for endogeneity and selectivity bias

Summary

Introduction

It has been generally agreed that the way forward for smallholder farmers is increased market participation. Institutions, policymakers and scholars alike continue to emphasise the role of markets in the development of smallholders. Olwande and Mathenge (2012) argue that any pathway that can lift large numbers of the rural poor out of poverty will require some form of transformation of smallholder agriculture into a more commercialised production system. The Ministry of Food and Agriculture’s (MoFA) Ghana Commercial Agriculture Project (GCAP) emphasises the importance of graduating from a subsistence-based smallholder system to a sector characterised by a stronger market-based orientation based on a combination of productive smallholders. The increased emphasis on market access relates to its potential to help smallholder farmers break the poverty trap that ensnares them. Several studies (e.g. Al-Hassan et al 2006; Abu et al Agricultural and Food Economics (2016) 4:21

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