Risk preferences and management strategies of farmers in Ghana: Does the type of crop grown matter?

Abstract

This paper examined the risk preferences and management strategies of cereal and legume farmers of Ghana's savannah zones using both the exploratory factor analysis and the linear regression model. Using primary cross-sectional data and employing the multistage sampling technique made up of purposive, cluster and random sampling techniques, the paper found that cereal farmers are more risk averse than legume farmers. Rainfall variability was ranked topmost by cereals and legumes farmers. Both cereal and legume farmers employ multiple but dissimilar risk management strategies to manage these sources of risk. The commonest sources of risk to cereal and legume farmers were climate and market risk, while off-farm activities are the commonest management strategy. Production risk faced by cereal farmers was managed by both off-farm and farm production strategies whereas human risk faced by legumes farmers was managed by both off-farm and financial management strategies. The importance of market risk implies that policy initiatives should aim at reducing market-related risks by focusing on increasing off-farm opportunities for rural households.