Profitability analysis of a farming system in Africa

Abstract

This analysis questions the assumptions that in a traditional farming system food production is primarily for home consumption and is not competitive with export crop (cocoa) production. Government planners and policy makers must look at the total operation of a farmer to understand the role of food crop production. In the case of Ghana in 1981 they needed to seek ways to make cocoa production relatively more profitable if the goal of increased cocoa production from small farms were to succeed. The analysis indicates why farmers were devoting scarce resources, particularly labor, to producing food crops in Ghana in 1981. Food crops were the most profitable both (1) in 1981 and (2) when the flow of income from the life of the trees was considered. Clearly, the farmers were demonstrating that they were rational economic men. In order to get an idea of what price cocoa must bring for it to be as profitable as the food crop systems, the price of cocoa was varied with all other prices held constant. The price of cocoa would have had to be approximately ¢400 per load of 30 kilograms in 1981. The government purchase price was ¢120 per load. Nor surprisingly, cocoa production in Ghana was declining steadily.