Effect Of Nucleus Farmer-Outgrower Schemes On Input Use Efficiency And Profitability Among Smallholder Farmers In The Northern Region Of Ghana

Abstract

The study assesses the effect of nucleus farmer-outgrower schemes on input use efficiency and profitability among smallholder farmers in the Northern Region of Ghana. Simple random sampling technique was employed to sample three districts from the Northern Region and a total of 330 smallholder farmers made up of 150 outgrowers and 180 non-outgrowers were interviewed using structured questionnaires. A comparative analysis is made between outgrowers and non-outgrowers. The study employs the binary logit regression model to identify the factors influencing participation in nucleus farmer-outgrower schemes and the translog production function and efficiency ratios to estimate the input use efficiency among smallholder farmers. The propensity score matching technique is employed to estimate the effect of nucleus farmeroutgrower schemes on profitability of smallholder farmers. The study reveals that the factors that significantly influence smallholder farmers’ participation in nucleus farmer-outgrower schemes are gender, marital status, farm size, membership of an FBO and extension contact. The gender and marital status of a farmer have negative influence on participation whilst farm size, membership of an FBO and extension contact have positive influence on participation. The study also reveals that outgrowers had significantly higher level of access to inputs and mechanized services than non-outgrowers. For the input use efficiency, the study reveals that both outgrowers and non-outgrowers are not efficient in utilizing the input resources available to them except for fertilizer where outgrowers are efficient in utilizing it. Finally, the study reveals that nucleus farmer-outgrower schemes have significant positive effect on smallholder farmer’s gross margins, net margins and returns on investment. The study recommends that, nucleus farmers and other stakeholders who are involved in developing outgrower schemes or similar initiatives should take into consideration the social and demographic characteristics of the target farmers to enhance participation. Nucleus farmers are also encouraged to offer more extension services to outgrowers on the efficient utilization of input resources. Outgrowers are advised to increase their seed and agrochemical use and reduce labour whilst Non-outgrowers are advised to increase fertilizer and labour use and reduce seed and agrochemical use so as to increase their efficiency and profitability. Government, NGOs and other private individuals and organizations who work to support farmers are advised to emulate the nucleus famer-outgrower model.