Cost structure of yam farmers in Ghana: The case of the forest savanna transition agro-ecological zone

Abstract

The study investigated the cost functions and the determinants of cost inefficiencies among yam farmers in Ghana using the stochastic frontier cost approach. The stochastic frontier cost approach estimates the general and inefficiency models simultaneously. Farm-level data and socio-economic variables on a sample of 374 yam farmers collected in 2009 in the Ashanti and Brong Ahafo regions were used in the study. The empirical results showed that cost of stakes and cost of seeds are the most important determinants of cost in the yam production process across the study communities. The cost of stakes was found to be significant in determining total cost. Planting cost constituted about 18 per cent of total costs. About 49.2 per cent of farmers sampled were producing on the cost curves higher than the average of the sample. The average inefficiency level generated was about 46 per cent higher than the minimum cost possible for the industry. The level of education of the farmer has a negative impact on farmer inefficiencies. The yield, which is the only output variable in the model had a positive impact on total cost with a coefficient less than 1, signifying an increasing return to scale. The area under cultivation had a mixed effect on inefficiency across regions, whilst there was no significant effect of the area under cultivation on cost in the Ashanti Region. Increasing area causes inefficiency and decline in the Brong Ahafo Region.