Profitability analysis of rice production: a microeconomic perspective from northern Ghana

Abstract

PurposeThe purpose of this study is to estimate the profitability of rice production for irrigated and rain-fed farmers; determine the factors that influence farmers' decision to participate in irrigation and the impact of irrigation on rice farmers' profitability in northern Ghana.Design/methodology/approachUsing cross-sectional data collected from 543 rice farmers in northern Ghana, the study employed both non-parametric (cost benefit analysis) and parametric (endogenous switching regression) approaches to analyse the data.FindingsThe empirical results reveal a significant difference between the profits of irrigated (GHS 2442.30) and rain-fed farmers (GHS 576.20), as well as the cost-benefit ratios between irrigators (2.53) and rain-fed farmers (1.37). Also, participation in irrigation was found to be influenced by relatively small farm size and off-farm income; while profitability was influenced by membership in a farmer-based organization, access to agricultural extension services and perception of decreasing rainfall intensity. Irrigation also had a positive significant net impact on profitability of rice production.Research limitations/implicationsThe results provide justification for development partners and the government of Ghana through the “one-village-one-dam” policy, to invest in irrigation in northern Ghana in order to improve household welfare as well as build resilience for sustainable production systems.Originality/valueThis study is the first of its kind to provide a robust analysis of the difference in profits of rain-fed and irrigated rice farmers while estimating the determinants of Ghanaian farmers' choice of either of the regimes within a bias-corrected framework.