Efficiency of agricultural commodity systems under policy reforms in Ghana

Abstract

The central theme of this paper is to illustrate the relevance of policy reforms on the macroeconomic environment and international commodity market in the efficiency and competitiveness of domestic agricultural commodity systems. It is pertinent for policy makers to know the linkage between macroeconomic policies and their impact at the farm and other levels of production, processing and marketing. This paper seeks to establish these linkages between policies and impacts for the principal agricultural commodity systems, and simulating likely changes in agricultural productivity that might arise from assumed policy changes. The Policy Analysis Matrix (PAM) approach, which is basically an application of social cost-benefit analysis and the basic concepts of trade theory, is the methodology used in this study as it generates basic indicators of efficiency and competitiveness of commodity systems. With respect to resource use, the study shows that labour claims the largest cost share in the production of most crops at the farm level with the notable exception of irrigated rice and oil palm. At the post farm level, cost shares tend to be quite different. Imported capital equipment and intermediate inputs become more important than labour. The study concludes that with the exception of pineapple, all the other commodities studied are socially profitable. Despite the recent increases in the export of pineapples, the commodity has no comparative advantage and is also privately unprofitable and therefore uncompetitive and inefficient, given the current state of the arts being employed in its production.