AN ECONOMIC ANALYSIS OF INORGANIC FERTILISER USE BY MAIZE FARMERS IN GUINEA SAVANNAH AND TRANSITIONAL ZONES OF GHANA BY FRED OPOKU MENSAH GYASI (10876962) THIS THESIS IS SUBMITTED TO THE UNIVERSITY OF GHANA, LEGON IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF MASTER OF PHILOSOPHY DEGREE IN AGRIBUSINESS DEPARTMENT OF AGRICULTURAL ECONOMICS AND AGRIBUSINESS COLLEGE OF BASIC AND APPLIED SCIENCES UNIVERSITY OF GHANA, LEGON JANUARY 2023 University of Ghana http://ugspace.ug.edu.gh i DECLARATION University of Ghana http://ugspace.ug.edu.gh ii DEDICATION I am able to complete this thesis successfully through the abundant grace and favour of God. I dedicate this work to my lovely wife; Mrs. Diamond Martinson Gyasi for her support and understanding throughout my studies. I also dedicate this work to all my family and friends whose selfless love and sacrifices have made me who I am today. University of Ghana http://ugspace.ug.edu.gh iii ACKNOWLEDGEMENTS I am grateful to the Almighty God for His guidance and protection throughout this study. I am thankful to my major supervisor, Professor Kwabena Asomanin Anaman for his advice, support, comments, and guidance. I would like to thank my co-supervisors, Dr. (Mrs.) Freda Elikplim Asem and Dr. William Adzawla for their constructive comments and support. I appreciate the support of all senior members of the Department of Agricultural Economics and Agribusiness, especially the Dean of the School of Agriculture; Professor (Mrs.) Irene Susana Egyir for her constant encouragement and support. I am grateful to International Fertilizer Development Center’s (IFDC) Fertilizer Research and Responsible Implementation (FERARI) program and West Africa Centre for Crop Improvement (WACCI) for their financial support. I appreciate the FERARI team; Prof. Prem Bindraban and Dr. Williams K. Atakora for their technical support. Also, my colleagues Dorothy K. Tetteh, Basiru Alhassan and Collins Tutu Boahen who were part of the FERARI internship for not making this MPhil journey a lonely one. A sincere thanks to all farmers who took time out of their busy schedules to respond to the questionnaire during the interviews for this study. Lastly, I wish to thank my family members; Dr. Victor A. Clottey, Gloria A. Quarcoo, Martha A. Gyasi, Mr. & Mrs. Obeng Ampadu, Mr. and Mrs. Agyeman-Powers, Mr. & Mrs. Adofo-Antwi, Mr. & Mrs Korang Yeboah and Mr. & Mrs. Donkor- Boateng for their love, prayers, support and encouragement. Fred Opoku Mensah Gyasi University of Ghana http://ugspace.ug.edu.gh iv ABSTRACT Fertiliser plays a vital role in maize farming due to the decline in soil fertility, but its main role of improving livelihoods lacks empirical evidence beyond its positive effects on yields. The objective of this study was to determine the effect of inorganic fertiliser use on the commercialisation and profitability of maize farmers in the Guinea Savannah and Transitional zones of Ghana. This study examined the factors that affect the use of inorganic fertiliser among smallholder maize farmers, the effect of inorganic fertiliser use on maize productivity, estimated the effect of inorganic fertiliser use on farm commercialisation and the effect of inorganic fertiliser use on profitability of maize production. The study was conducted in 16 districts from eight regions in Ghana's Guinea Savannah and Transitional zones. Data was collected from 448 randomly selected respondent’s in- situ using kobo collect toolbox. The study employed a double hurdle model to identify factors that determine use and intensity of inorganic fertiliser, a linear regression was used to examine the effects of inorganic fertiliser use on maize productivity, a Tobit model was used to estimate the effect of inorganic fertiliser use on the Household Commercialisation Index and the inorganic fertiliser use on profitability was estimated using the Value Cost Ratio. The probability of farmers' decision to jointly use inorganic fertiliser and intensity of inorganic application is high among farmers in the Guinea Savannah zone. The basal application of fertiliser integrated with improved seeds enhances maize productivity. The use of inorganic fertilisers raises farmers’ levels of commercialisation which suggests that using inorganic fertiliser can be an important step in raising maize yield over the level needed for subsistence. The level of profitability among inorganic fertiliser users is low. Maize commercialisation and production credit increase maize profitability. The study recommends that, to improve maize profitability from inorganic fertiliser use, farmers must produce beyond the subsistence level to a more commercialised level. University of Ghana http://ugspace.ug.edu.gh v Table of Contents DECLARATION ............................................................................................................................. i DEDICATION ................................................................................................................................. i ACKNOWLEDGEMENTS ........................................................................................................... iii ABSTRACT ................................................................................................................................... iv LIST OF FIGURES ..................................................................................................................... viii LIST OF ACRONYMS ................................................................................................................. ix CHAPTER ONE ............................................................................................................................. 1 INTRODUCTION .......................................................................................................................... 1 1.0 Background to the Study .................................................................................................. 1 1.1 Problem Statement ........................................................................................................... 4 1.2 Research Questions .......................................................................................................... 7 1.3 Research Objectives ......................................................................................................... 8 1.4 Significance of the Study ................................................................................................. 8 1.5 Organisation of the Study Report ..................................................................................... 9 CHAPTER TWO .......................................................................................................................... 11 LITERATURE REVIEW ............................................................................................................. 11 2.0 Introduction .................................................................................................................... 11 2.1 Maize Production in Ghana ............................................................................................ 11 2.2 Overview of Soil Quality, Fertiliser Use and Subsidy Program .................................... 15 2.2.1 Soil Quality ............................................................................................................. 15 2.2.2 Fertiliser Use in Ghana and the Sub-Saharan African Region ............................... 15 2.2.3 The Ghana Fertiliser Market and Subsidy Program ............................................... 19 2.2.4 Fertiliser Recommendation in Ghana ..................................................................... 22 2.3 The Concept of Farm Commercialisation ...................................................................... 23 2.3.1 Conceptualising Smallholder Commercialisation ................................................... 23 2.3.2 The Historical Context of Agricultural Commercialisation.................................... 24 2.3.3 Measuring Smallholder Agricultural Commercialisation ....................................... 27 2.4 Empirical Review ........................................................................................................... 28 2.5 Gaps in the Literature and Conclusion ........................................................................... 31 METHODOLOGY ....................................................................................................................... 33 3.0 Introduction .................................................................................................................... 33 University of Ghana http://ugspace.ug.edu.gh vi 3.1 Theoretical Framework .................................................................................................. 33 3.2 Conceptual Framework .................................................................................................. 35 3.3 Methods of Data Analysis .............................................................................................. 38 3.3.1 Examine the factors that affect inorganic fertiliser use among smallholder maize farmers 38 3.3.2 Effect of inorganic fertiliser use on maize productivity ......................................... 41 3.3.3 Effect of inorganic fertiliser use on farm commercialisation by maize farmers ..... 41 3.3.4 Effects of inorganic fertiliser use on farm profitability .......................................... 43 3.4 Description of Variables................................................................................................. 47 3.5 Data Collection and Sampling Techniques .................................................................... 50 3.6 Description of the Study Area ........................................................................................ 52 CHAPTER FOUR ......................................................................................................................... 56 RESULTS AND DISCUSSION ................................................................................................... 56 4.0 Introduction ......................................................................................................................... 56 4.1 Socio-economic and Farm Characteristics of Respondents ................................................ 56 4.2 Inorganic Fertiliser Utilisation ............................................................................................ 59 4.3 Inorganic Fertiliser Utilisation Intensity Methods among Farmers .................................... 59 4.4 Adoption of Inorganic Fertiliser Application Methods among Farmers ............................. 62 4.5 Access to Markets ............................................................................................................... 65 4.6 Access to Market Information Services .............................................................................. 68 4.7 Factors Influencing the Decision and Intensity of inorganic Fertiliser Application ........... 69 4.8 Factors Influencing Maize Productivity .............................................................................. 75 4.9 Effect of Inorganic Fertiliser Use on Maize Commercialisation ........................................ 77 4.10 Effect of Inorganic Fertiliser Use on Maize Profitability ................................................. 83 CHAPTER FIVE .......................................................................................................................... 88 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS................................................. 88 5.1 Summary of the Study ......................................................................................................... 88 5.2 Conclusions of the Study..................................................................................................... 90 5.3 Recommendations ............................................................................................................... 91 REFERENCES ............................................................................................................................. 92 University of Ghana http://ugspace.ug.edu.gh vii LIST OF TABLES TABLE PAGE Table 2.1: Fertiliser Imports in Ghana .......................................................................................... 20 Table 3.1: Description of Variables .............................................................................................. 47 Table 3.2 Regions, Districts and Communities sampled .............................................................. 51 Table 4.1: Characteristics of sampled farmers .............................................................................. 58 Table 4.2: Declared types of inorganic fertilisers used for basal and top-dressing regimes ........ 61 Table 4.3: Access to information about inputs and outputs .......................................................... 68 Table 4.4: Factors influencing farmers decision to use inorganic fertiliser and intensity of utilisation....................................................................................................................................... 74 Table 4.5: Factors influencing maize productivity ....................................................................... 76 Table 4.6: Estimates of Tobit model for drivers of maize commercialisation .............................. 82 Table 4.7: Factors influencing the profitability of inorganic fertiliser use by maize farmers ...... 87 University of Ghana http://ugspace.ug.edu.gh viii LIST OF FIGURES FIGURE PAGE Figure 2.1: Maize Production in Ghana ........................................................................................ 12 Figure 2.2: Ghana's Maize Yield Compared to Yields in Selected Countries .............................. 14 Figure 2.3: Fertiliser Production, Imports, Exports and Apparent consumption, 2021 ................ 17 Figure 2.4: Apparent consumption of fertiliser products in selected countries ............................ 18 Figure 3.1: Conceptual Framework .............................................................................................. 37 Figure 3.2: Map of the Ghana with indications of the Study Area ............................................... 55 Figure 4.1: Inorganic fertiliser utilisation status, Ghana............................................................... 60 Figure 4.2: Fertiliser application methods .................................................................................... 64 Figure 4.3: Availability of community markets and methods of selling outputs ......................... 66 Figure 4.4: Market channels for maize farmers ............................................................................ 67 Figure 4.5: Distribution of Household Commercialisation Index (HCI) ...................................... 81 Figure 4.6 Level of profitability among fertiliser users ................................................................ 86 University of Ghana http://ugspace.ug.edu.gh ix LIST OF ACRONYMS AVCR Average Value-Cost Ratio FAO Food and Agriculture Organization of the United Nations FBO Farmer-Based Organisations FERARI Fertilizer Research and Responsible Implementation FSP Fertiliser Subsidy Program GOG Government of Ghana GDP Gross Domestic Product GSS Ghana Statistical Service HCI Household Commercialisation Index IFAD International Fund for Agricultural Development IFDC International Fertilizer Development Center IFPRI International Food Policy Research Institute LDC Louis Dreyfus Company Ghana MiDA Millennium Development Authority MoFA Ministry of Food and Agriculture MVCR Marginal Value-Cost Ratio OLS Ordinary Least Squares PFJ Planting for Food and Jobs RCT Rational Choice Theory SDGs Sustainable Development Goals SIDA Swedish International Development Association SSA Sub-Saharan Africa VCR Value-cost ratio University of Ghana http://ugspace.ug.edu.gh 1 CHAPTER ONE INTRODUCTION 1.0 Background to the Study The Sustainable Development Goals (SDGs) one and two strive to respectively eliminate poverty and hunger by 2030 (United Nations, 2015). A key to achieving these SDGs in many African countries is agricultural development. As such, governments across Sub-Saharan Africa (SSA) have introduced technologies including high yielding seeds, quality fertilisers, irrigation systems and other agricultural subsidies in bid to improving yield and farm incomes. The equation for determining global food security heavily depends on smallholder farmers in developing countries. According to Fan and Rue (2020), more than 80% (475 million) among all farms worldwide are situated on less than two hectares of land. These farms generate nearly 80% of the food produced in SSA despite making up only 12% of global agriculture (Lowder, Skoet & Singh, 2014). Notwithstanding their critical role, these smallholder farmers prioritize subsistence production, with the goal of meeting domestic and household food needs first and then selling only if there is a surplus. Subsistence farms are usually characterized by low cultivated area, low technology adoption and access to market difficulties (Dodd et al., 2020). Ghana's economy continues to be significantly reliant on agriculture, with an average annual growth rate of approximately 6% from 2017 to 2022 and contributing to about 21% of the nation’s Gross Domestic Product (GDP) (Ghana Statistical Service, 2023). Its role in ensuring food security, provision of industrial raw materials, source of income and employment for many people is very important (Nyamekye, Tian & Cheng, 2021). Based on information derived from the 2021 National Census conducted by the Ghana Statistical Service, agriculture employed approximately 33% of the workforce in 2021. Despite its significance, Ghana's agricultural sector is marked by University of Ghana http://ugspace.ug.edu.gh 2 low productivity, small-scale farms, underdeveloped huge tracts of land that are perfect for agricultural growth, poor soil conditions and expensive fertiliser, as well as inadequate infrastructure (Iddrisu et al., 2021). The majority of smallholder farmers have experienced increased poverty as a result. According to the International Food Policy Research Institute (IFPRI), changes in environmental conditions caused by high population growth rates are one of the key causes of low productivity. Ghana's high population expansion in rural and urban areas has raised demand for food and energy (Kousar et al., 2021). According to van Loon et al. (2019), to meet food demand in the near future, agricultural productivity in the country must double by 2050. Rapid population growth has also boosted demand for cultivable land, resulting in forest destruction (Acheampong et al., 2019). This has a negative impact on the environment's sustainability by exposing farmland to erosion and rendering agricultural production subject to weather changes, as well as loss in soil fertility that is difficult to repair. Soil fertility decline is linked to insufficient recycling of soil nutrients, which leads to steady loss of soil organic matter (Scotti et al., 2015). This reduces agricultural output and, as a result, raises poverty levels. Ghana's agricultural policies and agricultural transformation agenda over the years indicate a goal to transition from subsistence to market-oriented agriculture. Agricultural Mechanization Services Enterprises Centers, the Fertiliser Subsidy Program (FSP), and the Block Farms Program are notable interventions that have been implemented since the late 2000s (Benin et al. 2013). Many of these initiatives have already been incorporated into the current government’s flagship Planting for Food and Jobs (PFJ) initiative, which was launched in 2017. All these interventions notwithstanding, there is still a persistent yield gap for many crops including maize. The low soil fertility status that emerges from continuous cropping without replacing the nutrients lost in harvested food is a major cause of the significant output disparities (Kongor et al., 2019; Sanchez, University of Ghana http://ugspace.ug.edu.gh 3 2002). Large yield gaps and the quick rise in global demand for nutritious foods offer opportunities to increase agricultural output on a local and international scale. Yet agricultural productivity remains stagnant in most countries in Africa. This is because smallholder farmers have been reluctant to invest in their small farms due to the meagre returns in food and farm income they can generate (Franke et al., 2014; Ritzema et al., 2017). The continued depletion of soil fertility and the need to improve yields have led to the promotion of fertilisers for crop production. The PFJ initiative provides improved seeds and fertiliser to farmers at subsidised prices (MoFA, 2017). Fertiliser is an important basic input in agricultural development and a major factor in efforts to increase agricultural productivity for food and nutrition security. Even though the fertilisers are mostly subsidised, its use especially at recommended levels remain a challenge. Farmers make production decisions based on the prevailing conditions, such as resource availability, production environment and socio-cultural customs (Adzawla et al., 2021). The motivation of smallholder farmers to use the right quantity of fertiliser is therefore hinged on the profitability of fertiliser use. Smallholder agricultural commercialisation can be broadly defined as the degree to which smallholder farmers and markets are linked at any particular time. Different definitions of agricultural commercialisation have been proposed by researchers. Some believe that commercialisation entails raising production above the point of subsistence, which results in the selling of marketable surplus (Goletti et al., 2003). Others characterize agricultural commercialisation as the propensity for farmers to sell a greater proportion of their products (Pradhan et al., 2010). Smallholder farmers' commercialisation of production systems, according to Seyoum, Lemma, and Karippai (2011), is the process by which a household's production purpose shifts from subsistence to profit maximization, as well as a production system in which University of Ghana http://ugspace.ug.edu.gh 4 households generate market-oriented items based on consumer preferences. As a result, smallholder commercialisation refers to a process whereby smallholder farmers intentionally employ their land, labour, tools, and inputs in order to maximize profit from the crops they produce or the animals they raise for trade or sale (Ejupu, 2001). This is because, in the age of globalization, smallholder farmers must produce for the market since they compete with farmers in their vicinity as well as those producing the same commodity at the regional and global levels (Berhanu et al., 2006). It is essential to remember that commercialisation may have an impact on production or supply markets by buying, selling, or a combination of the two. Smallholder commercialisation may also be viewed as a dynamic process, depending on how quickly household-level changes in the ratio of inputs and outputs over time. One of the motivating tools culminating into one of the focuses of the PFJ offers auxiliary services such as extension services and output marketing (MoFA, 2017). Commercialisation is thus critical for increasing farm profitability and farmers' overall livelihood. According to Gebreselassie and Sharp (2007), the goal of becoming commercialised is to generate improved welfare outcomes for smallholders by transitioning from subsistence to market-oriented farming. However, engaging in commercialisation would require smallholder farmers to have a significant surplus for sale, which can be increased by using inorganic fertiliser to replenish lost nutrients. 1.1 Problem Statement Agricultural development and transformation are crucial for the socioeconomic development of Ghana, especially the rural areas. Despite the modern technology and adoption of different maize varieties, the productivity of smallholder farmers remains low. According to Rabbi et al. (2019), University of Ghana http://ugspace.ug.edu.gh 5 many factors contribute to the low productivity and decline in agriculture. Largely, this includes lack of credit provision, slow adoption rate of farming techniques, limited quantities of inputs, lack of infrastructural facilities, trade and marketing restrictions and lack of agriculture finance. These challenges are continually being worsened by the depletion of arable soils. A major step to restore nutrient for crops is to apply fertilisers. But this increases the cost of crop production for the already under-resourced poor farmers. Beyond the cost, the use of inorganic fertilisers is expected to generate higher revenue through higher outputs. Hence, the issue is neither about the cost of the inorganic fertiliser inputs to the total cost, nor revenue, but the profitability of the farms. Both supply-side and demand-side issues might be held responsible for the low inorganic fertiliser use in Africa (Druilhe & Barreiro-Hurlé, 2012). The profitability of inorganic fertiliser use is a significant demand-side element that may contribute to Africa's low inorganic fertiliser utilisation. Because most farmers undoubtedly find using inorganic fertiliser to be either unprofitable or just marginally profitable, there is a low demand for commercial inorganic fertiliser among farmers. Low inorganic fertiliser response rates, high crop yield variability, credit constraints, and high inorganic fertiliser costs relative to crop output prices frequently undercut the incentives to apply inorganic fertiliser. The demand for inorganic fertiliser is further exacerbated by a lack of knowledge regarding the availability and cost of inorganic fertiliser, farmers' inability to raise the funds required to buy inorganic fertiliser, and insufficient understanding on the side of many farmers regarding the efficient use of inorganic fertiliser. On the supply side, issues including an unfavourable business climate, tight regulations, exorbitant taxes and fees, and a lot of rent-seeking prevent farmers from using fertiliser. The challenges and factors may be location, crop or time specific. For Ghana, maize is an important food security crop. Therefore, the effects of these factors on the food security of the country can be dire if not checked. University of Ghana http://ugspace.ug.edu.gh 6 According to IFAD-IFPRI (2011), despite the rising emphasis on connecting smallholder farmers to markets, agricultural commercialisation remains low. Ghana's average marketable surplus ratio, which shows commercialisation, is 33%, which is low but higher than the SSA average (IFAD- IFPRI, 2011). According to the Swedish International Development Association (SIDA), just 10% of Sub-Saharan African smallholders produce sufficient marketable surpluses (Siziba et al., 2011). Maize which has the potential to increase income, is nevertheless commonly grown as a staple crop in the northern part of the country (MiDA, 2010). Low production per hectare, crop diversity, small farm sizes, and large household sizes all contribute to the low level of commercialisation (IFAD-IFPRI, 2011). According to Chamberlin et al. (2007), the limited access to input and product markets, financial services, and consulting services is the underlying cause of the low level of commercialisation. The new political economy development with regards to Russia-Ukraine war has a significant adverse effect on agriculture in Ghana. This is because, as stressed in the political economy literature, the agricultural sector cannot be isolated from international dynamics including externally induced economic shocks beyond the sector. It is important to note that, Russia is the largest exporter of inorganic fertilisers and minerals in the world. The new 2022 Western sanctions on Russia, and the Russia-Ukraine War over the refusal of the Ukrainian government to implement the 2014/2015 Minsk Agreement brokered by France, Germany, and Russia which ended the 2014 Civil War with Russian-speaking rebels in Eastern Ukraine, are affecting the international prices of inorganic fertilisers. This development had led to the shortage of inorganic fertilisers and could affect the cost of production leading to the lower income levels of farms. Research into the correlation between technology adoption, particularly inorganic fertiliser, and smallholder commercialisation and profitability are few in the economic literature, particularly in University of Ghana http://ugspace.ug.edu.gh 7 developing nation settings such as Ghana. Furthermore, the view that fertiliser use is insufficient is predicated on the assumption that higher rates than those currently utilised by smallholder farmers are profitable. There is, however, little substantive empirical data to support this claim. While various research has been conducted to study fertiliser yield response in crop production, (see Adzawla et al., 2021; Senkoro et al., 2018; Ragasa & Chapoto, 2017; Chapoto et al., 2015), the number of studies investigating the profitability of fertiliser use in Ghana is not high. Researching the effects of inorganic fertiliser use on commercialisation and profitability, particularly in developing countries such as Ghana, opens up a new channel for connecting smallholder farmers to urban food value chains, which could be a viable instrument for rural poverty reduction. It may not be justifiable to conclude that beyond the positive effects of fertiliser use on yields, fertiliser is key for improving the livelihoods of the farmers without empirical evidence. To contribute to the debate on the need for farmers to increase investment in soil fertility improvement through inorganic fertiliser application, it is important to analyse the profitability of inorganic fertiliser application as well as the effect of inorganic fertiliser use on commercialisation. 1.2 Research Questions The questions formulated to address the problem identified include: 1. What are the factors that affect inorganic fertiliser use among smallholder maize farmers in the research area? 2. What is the effect of inorganic fertiliser use on maize productivity of smallholder farmers in the research area? University of Ghana http://ugspace.ug.edu.gh 8 3. What is the effect of inorganic fertiliser use on maize commercialisation by smallholder farmers in the research area? 4. What is the effect of inorganic fertiliser use on profitability of maize production in the research area? 1.3 Research Objectives The main objective of the study is to examine the effect of inorganic fertiliser application on maize commercialisation and profitability in the Guinea Savannah and Transitional zones of Ghana. The specific objectives are to: 1. Examine the factors that affect the use of inorganic fertiliser among smallholder maize farmers in the research area. 2. Analyse the effect of inorganic fertiliser use on maize productivity of smallholder farmers in the research area. 3. Estimate the effect of inorganic fertiliser use on maize commercialisation by smallholder farmers in the research area. 4. Estimate the effect of inorganic fertiliser use on profitability of maize production in the research area. 1.4 Significance of the Study This study is useful to various stakeholders in the agricultural sector by providing empirical evidence on the factors that influence the commercialisation and profitability in the use of inorganic fertiliser among maize farmers. This information can be used in setting policies aimed University of Ghana http://ugspace.ug.edu.gh 9 at transforming smallholder farmers, especially in reacting to market incentives for increased agricultural earnings, which in turn leads to decreased poverty and increased food security. Understanding the extent and drivers of the move towards smallholder commercialisation and profitability has significant scope for coherent policymaking. As such studying the effect of inorganic fertiliser adoption on commercialisation and profitability is an avenue for linking smallholder farmers to urban food value chains that might be a promising tool for rural poverty alleviation. This information is important to MoFA, considering that two out of the five pillars of the PFJ program by the government are to subsidise fertiliser and create market opportunities for farmers. This study provides information regarding farmer-specific variables that influence market participation as well as the profitability of inorganic fertiliser use, which would be valuable to farm households in making decisions. Farmers, for example, can choose to join farmer-based organisations. The findings of this study will contribute to enhancing the existing literature on fertiliser utilization for maize production in the Guinea Savannah and Transitional Zones of Ghana. Another relevance of the study is its potential to inform policymakers and agricultural stakeholders about the specific challenges and opportunities related to inorganic fertiliser use in the Guinea Savannah and Transitional Zones of Ghana. The study can guide the development of tailored policies and interventions aimed at not only boosting the commercialisation and profitability of maize farming but also improving overall agricultural productivity and food security in these specific regions. 1.5 Organisation of the Study Report This research is organised into five chapters. The first chapter which is the introduction, includes the background to the study, problem statement of the study, the objectives of the study, the University of Ghana http://ugspace.ug.edu.gh 10 research questions, significance of the study and organisation of the study. The second chapter presents a review of relevant literature including the theoretical literature review which discusses the theories that underpin the study, the conceptual literature review which discusses the various concepts that are used in the study and finally the empirical review looks at the previous studies that have been done around the study area. Chapter Three describes the methodology employed in the study. The outcome and discussion are presented in Chapter Four. Chapter Five summarizes the research and provides the conclusions, recommendations, and suggestions for further studies. After chapter five, there are references and appendices. University of Ghana http://ugspace.ug.edu.gh 11 CHAPTER TWO LITERATURE REVIEW 2.0 Introduction Background information on maize production, soil quality, and fertiliser use in Ghana is provided in the literature review that follows. In addition, the concept of smallholder farm commercialisation is discussed. The chapter concludes with a summary of the results obtained from empirical works that have examined the factors that affect the use of inorganic fertiliser, yield response to inorganic fertiliser use, effect of inorganic fertiliser uses on farm commercialisation and inorganic fertiliser use profitability. 2.1 Maize Production in Ghana Ghana’s total country area including land and water areas is 23,853,000 hectares, land area of 22,753,300 hectares and inland water area of 1,100,000. Agricultural land area accounts for approximately 55% (12,603,740 hectares) of total surface area, with arable land accounting for 37%. (4,708,900 hectares), (FAOSTAT, 2021). Maize is a widely farmed and consumed staple crop in Ghana. The second crop, cassava, accounts for around half as many calories as maize, according to the Ghana Statistical Service (GSS) (2018). According to Gage et al. (2012), approximately 75% of maize consumption is self-produced, showing that maize has little potential as a revenue crop. Launched in 2017, the Planting for Food and Jobs (PFJ), which is a government's flagship program, gives priority to the distribution of maize seed and fertiliser and promotes smallholder market participation (MoFA, 2019). Ghana's maize production from 2000 to 2020 is shown in Figure 2.1. University of Ghana http://ugspace.ug.edu.gh 12 Figure 2.1: Maize Production in Ghana Source: FAOSTAT, 2022 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Production 1.01 0.94 1.40 1.29 1.16 1.17 1.19 1.22 1.47 1.62 1.87 1.68 1.95 1.76 1.76 1.69 1.72 2.01 2.31 2.90 3.07 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 M ai ze P ro d u ct io n ( in m ill io n t o n n es ) Year University of Ghana http://ugspace.ug.edu.gh 13 For the years 2000 through 2020, the average amount of maize produced was 1.68 million tonnes. It's important to note that the average output of maize from 2017 to 2019 has increased by 48% compared to the average output from 2013 to 2016. The government places this enormous rise in output on PFJ. Ghana’s performance in maize production must be measured with that of its neighbours. Figure 2.2 compares Ghana’s maize production to other selected countries in Africa. Ghana’s maize production has been increasing in the past 10 years. The average maize yield in 2020 was 2.0 tons/ha. Comparing maize yields in Ghana with other African countries shows that maize yields have been higher than Burkina Faso, Benin, Nigeria, Kenya and Togo for the past decade. However, neighbouring Cote d’Ivoire and Mali’s maize yields have been higher than Ghana in the past decade. University of Ghana http://ugspace.ug.edu.gh 14 Figure 2.2: Ghana's Maize Yield Compared to Yields in Selected Countries Source: FAOSTAT, 2022 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Yi el d o f m ai ze , t h er H a Cote d'Ivoire Nigeria Benin Kenya Burkina Faso Mali Ghana Togo University of Ghana http://ugspace.ug.edu.gh 15 2.2 Overview of Soil Quality, Fertiliser Use and Subsidy Program 2.2.1 Soil Quality Soil quality in SSA has been degrading for some time, and Ghana's soil is no different (Kihara et al., 2020). Significant nutrient shortages have been determined all over Ghana, and they seem to be caused, at least in part, by poor farming practices. Permanently cultivated soils in the northern part of the country have been found to have much worse chemical and nutritional characteristics than soils with natural vegetation (Braimoh & Vlek, 2004). With the use of inorganic fertiliser in Southern Ghana, rice yields were demonstrated to dramatically rise (Moro et al., 2008). Available estimates show that Ghana experiences yearly nutrient losses of over 60 kg/Ha NPK, one of the highest rates in SSA (Henao & Baanante, 1999; Stoorvogel et al., 1993). 2.2.2 Fertiliser Use in Ghana and the Sub-Saharan African Region Numerous studies in SSA have demonstrated that substantial increases in fertiliser use are necessary to reduce the enormous nutrient losses happening on a considerable portion of SSA's arable land (see Wallace & Knausenberger, 1997; Crawford et al., 2005; Morris et al., 2007). Despite the fact that inorganic fertiliser is strongly highlighted in national development objectives, Ghana currently has a low usage rate (Bationo et al., 2018). Sub-Saharan Africa has an average fertiliser application rate of 22 kilograms per Ha, compared to a world average seven-times higher (146 kilograms per Ha). Some countries, such as China and Chile, are closer to 400 kilograms per hectare, according to the World Bank (2022). This is less than the target set by the Abuja Declaration in 2006 for African countries achieve an average of 50 kilograms per Ha by 2015 (Hill & Kirwan, 2015). University of Ghana http://ugspace.ug.edu.gh 16 Figure 2.3 shows the production, imports, exports and apparent use of fertiliser products in 2021 for some selected countries namely Benin, Burkina Faso, Cote d’Ivoire, Ghana, Kenya, Mali, Nigeria, Senegal, Tanzania and Togo. It is important to note that, although Nigeria produced about 2.7 million metric tonnes of urea fertiliser in 2021, 1.3 million metric tonnes were exported of which 87% (1.18 million metric tonnes) were exported to Brazil. (Vifaa Nigeria Dashboard, 2022). Ghana has limited data on fertiliser use by crop, however it appears that the largest fertiliser and application rates are used on crops like vegetables, cocoa, and palm oil, which are mostly cash crops. Maize application rates fall into the middle range. In Ghana, just 31% of families utilise fertilisers, while regional differences exist in this percentage (Bationo et al., 2018). Less than 10% of small - scale farmers with farms smaller than 1.0 ha use fertiliser, compared to over 20% of those with farms larger than 5.0 ha. Figure 2.4 compares Ghana’ fertiliser apparent consumption from 2010 – 2020 with other countries. Figure 2.4 shows that, apparent consumption of fertiliser has been on an upward trend for the selected countries, albeit experiencing some dips in certain years. Favourable global commodity and fertiliser prices, government initiatives like subsidy programs, and investments from private sector in the production, blending, distribution, and marketing of fertilisers are the three key driving forces which led to a significant increase in fertiliser consumption in the major fertiliser markets in West Africa between 2015 and 2020. Despite a significant increase in fertiliser imports and usage following the 2008 worldwide oil and food crises, Ghana’s fertiliser market is still considerably smaller than that in several other countries, including Kenya and Nigeria. University of Ghana http://ugspace.ug.edu.gh 17 Figure 2.3: Fertiliser Production, Imports, Exports and Apparent consumption, 2021 Source: AfricaFertilizer.org 0 500 1,000 1,500 2,000 2,500 3,000 Nigeria Kenya Tanzania Cote d'Ivoire Mali Mali Ghana Benin Senegal V o lu m es ( in t h o u sa n d o f o f p ro d cu t to n s) Production Import Export Apparent Consumption University of Ghana http://ugspace.ug.edu.gh 18 Figure 2.4: Apparent consumption of fertiliser products in selected countries Source: AfricaFertilizer.org 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 V o lu m e s ( in t h o u sa n d o f o f p ro d cu t to n s) Benin Burkina Faso Cote d'Ivoire Ghana Kenya Mali Nigeria Senegal Tanzania University of Ghana http://ugspace.ug.edu.gh 19 In 2021, most countries saw reduction in fertiliser imports which affected the apparent consumption of fertilisers as a result of the oil price increases. With the Russia-Ukraine war in 2022, making fertiliser commodity scarce, many African countries may not meet their fertiliser needs for food production unless there are interventions by governments and private sector. 2.2.3 The Ghana Fertiliser Market and Subsidy Program Inorganic fertilisers are not produced in Ghana. Therefore, all the inorganic fertilisers that are used in the country are imported mostly from Russia, Norway, Latvia, Morocco, Italy, United States, Spain, and Finland. Imported inorganic fertilisers usually come in bulk and compound form. A network/system of wholesalers and retail agro dealers distributes the bulk inorganic fertilisers in a variety of formulations. Six of the largest importers – Agricultural Manufacturing Group, Chemico Ghana Limited, GloFert Limited, Louis Dreyfus Company Ghana, OmniFert Limited, and Yara Ghana Limited have made investments in inorganic fertiliser blending facilities that enable them to create various inorganic fertiliser formulations. It is important to note that every blending facility is in the southern part of the country at places like Tema, Kpong, Dawhenya and Teacher Mantey. Locally, ACARP, Safisana, and JEKORA Ventures generate a tiny portion of organic fertilisers. University of Ghana http://ugspace.ug.edu.gh 20 Table 2.1: Fertiliser Imports in Ghana Fertiliser Name 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 NPK 67,071 50,405 127,393 117,047 44,880 138,140 132,632 213,887 224,176 217,024 299,423 152,267 Ammonium sulphate 29,570 38,474 61,585 54,863 6,282 64,015 23,268 43,865 10,084 17,326 43,994 32,561 MOP 37,832 30,505 43,420 19,849 22,715 18,707 13,842 24,235 15,993 42,235 55,611 15,329 Urea 14,025 2,838 17,665 36,104 202 18,348 39,035 88,259 42,005 77,011 89,956 3,800 Organic fertilisers 88 13 275 6,465 5,523 7,818 8,772 37,643 5,875 4,673 270 2,495 TSP 79,042 50,177 92,456 47,173 21,258 32,052 13,802 26,766 9,460 29,300 35,268 - Other fertilisers 18,288 24,905 30,971 16,587 10,223 11,077 8,532 9,582 7,564 37,542 94,117 32,610 Total, metric tonnes 245,916 197,317 373,765 298,086 111,083 290,156 239,883 444,236 315,157 425,110 618,638 239,062 Source: AfricaFertilizer.org University of Ghana http://ugspace.ug.edu.gh 21 Table 2.1 shows that, the average fertiliser imports to Ghana between 2017 to 2020 was about 450,000 metric tonnes. However, in 2021, imports reduced to less than 250,000 metric tonnes as a result of price hikes in the world market as prices of inorganic fertilisers doubled in ending 2020 and throughout 2021. The Fertiliser Subsidy Program (FSP), a nationwide agricultural farming support program, existed prior to the PFJ initiative. For supply, delivery, and retail, it made use of the fertiliser industry's private sector. Agricultural extension agents gave vouchers in 2008 and 2009 that were region- and fertiliser-specific and might be used as a portion of the purchase price for fertilisers at any shop that would accept them. (Baltzer & Hansen, 2012; Banful, 2010). In response to criticism regarding the insufficient performance of the voucher scheme, the government took action in 2010 by discontinuing the voucher program. Instead, they opted to directly cover half of the fertiliser costs and all transportation expenses (Banful, 2011). The expense of the FSP reportedly got intolerable after rising from GHS 20.65 million ($3.28 million) in 2008 to GHS 239 million ($37.94 million) in 2017. It was by far the highest yearly rise in the program's fiscal allocation since 2008, with the amount the government spent on the FSP rising by nearly 73 percent in 2017 compared to 2016. Between 2008 and 2016, the government spent around GHS 570,80 million ($90,60 million) on this initiative. MoFA claimed that the FSP had very little of an impact on smallholder farmers' access to and adoption of fertiliser. This stemmed from the fact that, majority of the program's target; smallholder farmers, still lacked the financial means to purchase fertiliser even at a reduced cost. As such large commercial and wealthy farmers ended up being the only beneficiaries of the initiative. As a result of the challenges with the FSP, a new strategy was required that incorporated a flexible payment system into the subsidy in order to encourage the use of fertilisers by smallholder farmers. University of Ghana http://ugspace.ug.edu.gh 22 The PFJ was created to take care of this issue. As a result, the PFJ's fertiliser-subsidy program included a novel option that encouraged fertiliser intake by farmers, particularly by smallholders, whose incomes were low and who had little money to spend on agricultural supplies. In particular, the program provided qualifying farmers with a 50 percent subsidy, permitting them to pay 25 percent of the cost of the fertiliser as a deposit and the other 25 percent upon harvest. There were sanctions meted out to any farmer who defaults in paying for the fertilisers. Beneficiaries would be removed from the program and lose their eligibility until they covered the final 25 percent of the cost of fertiliser for two consecutive planting seasons. Each qualifying farmer was also limited to using a total of six bags of organic fertiliser for soybean, ten bags of NPK fertiliser, and five bags of urea or sulphate of ammonia fertiliser for all other crops. To avoid abuse, this equated to a two-hectare maximum fertilised crop area per farmer. The estimated cost of the PFJ's national fertiliser subsidy during a three-year period from 2017 – 2019 was GHS 1.8 billion ($401 million). The PFJ's implementation was continued past 2020 due to its perceived success. At a reduced input subsidy rate of less than 30% in 2021, the government of Ghana spent $70 million to fund the program. In 2022, the government is investing $98 million in the initiative, a 40 percent increase in funding from 2021. Despite the initial shortcomings of the program, following its implementation, maize yields in Ghana have shown a significantly greater increase compared to those in other West African countries that do not offer subsidies. 2.2.4 Fertiliser Recommendation in Ghana Over the years, research have been carried out to determine the appropriate fertiliser rate for Ghana. From 1948 to 1970, thorough research was done to provide fertiliser recommendations in University of Ghana http://ugspace.ug.edu.gh 23 Ghana, and the government's recommended 80N-40P2O5-0K2O per acre for maize was established. (FAO, 1971). It is important to note that studies carried out in 2017 and 2018 by Gondwe and Nkonde (2017) and Tetteh et al. (2018) improved the previously developed fertiliser recommendations with much effort. As a result, the current fertiliser nutrient rate for maize in the Guinea Savannah zone is 100N-40P2O5-40K2O + 2.1Zn and Forest Savannah Transition zone is 90N-60P2O5-60K2O + 2.1Zn kg per ha. The recent fertiliser recommendations, according to IFDC (2019), aim to raise maize production from an average of 1.8 t ha-1 to 5 t ha-1. To further improve future recommendations, given the vast range of soil variations, it is important to investigate the underlying reasons of the yield response to these rates. If not, those rates can still be regarded as general fertiliser recommendations with little application to diverse smallholder farms. According to Zingore et al. (2007), it is essential to apply inorganic fertilisers and manure selectively based on the soil type and previous field management in order to increase crop yields and optimize nutrient use. 2.3 The Concept of Farm Commercialisation 2.3.1 Conceptualising Smallholder Commercialisation Smallholder agricultural commercialisation has diverse definitions in academia. Some view it as elevating production beyond subsistence for surplus sales (Goletti et al., 2003), while others regard it as increasing the portion of production sold (Pradhan et al., 2010). Seyoum, Lemma, and Karippai (2011) define it as a shift from subsistence to profit-driven household production, resulting in market-oriented products. Essentially, smallholder commercialisation represents deliberate efforts by farmers to maximize income from crops or livestock intended for sale or trade (Ejupu, 2001). University of Ghana http://ugspace.ug.edu.gh 24 In a nutshell, it can be seen from the various definitions that, there is no definite definition of smallholder commercialisation. Based on the farmer's objectives, goals, and aspirations, it can be described. Therefore, smallholder commercialisers of agriculture production might be viewed of as small-scale farmers who are more integrated into the local, national, and international markets. This is due to the fact that smallholder farmers nowadays must produce for the market since they are in competition both with local farmers and with farmers that produce the same commodity on a regional and global scale (Gebremedhin et al., 2006). It is significant to note that the objectives and aspirations of smallholder farmers influence how agricultural production is defined as being commercialised. This includes production that is primarily intended for sale and is motivated by the desire to maximize profits while meeting the varied needs and interests of the consumer. 2.3.2 The Historical Context of Agricultural Commercialisation Many established and emerging economies have demonstrated the effectiveness of commercialising agricultural produce in promoting industrial and economic progress (Jaleta et al., 2009; Kofi Annan Foundation, 2011). Large-scale commercialised agriculture using cutting-edge machinery and technologies has significantly aided economic and industrial growth in North America, Europe, Israel in the Middle East, and countries in Southern America such as Brazil and Argentina, as well as Asian economies such as China and India (Eicher & Staatz, 1985). Commercial farming was primarily introduced by European colonial masters in developing nations, particularly in Sub-Saharan Africa, Asia, and South America, to feed their industries in Europe (Eicher & Staatz, 1985). According to Robbins and Ferris (2003), the commercialisation of agriculture prompted the creation of infrastructure and the introduction of cash crops, both of University of Ghana http://ugspace.ug.edu.gh 25 which continue to make up a sizable portion of the national GDP of the majority of developing countries today (like coffee export from Uganda, tea export from Kenya and cocoa export from Ghana). Commercialisation of smallholder agriculture in Ghana has a lengthy history that dates back to the colonial eras. The first crops to emerge were oil palm, rubber and, later, cocoa for export. The production of cocoa significantly increased smallholder commercial farming. The smallholder-led approach minimized the colonial state's failure to expropriate locals' land as part of a plan for agricultural commercialisation. Cocoa growers were maintained in a cycle of trading activity, debt, and sensitivity to the ups and downs of the global commodities markets by providing inputs, training, fixed prices, and promised markets. A farming system that had historically included a variety of crops was rapidly replaced by oil palm and cocoa due to the commercial production of agricultural export commodities. Female farmers who combined autonomous and home farming with selling produce on their own behalf and that of their male household leaders generated the majority of the staple foods grown by farmers and sold in Ghana and in marketplaces throughout West Africa. However, compared to the cocoa business, commercialised food production did not have the same advantages or enjoy the same level of strong institutional and policy support. The post-colonial state continued smallholder commercial farming for cocoa after becoming independent, but it also made an attempt to build and support state-owned and privately held plantations and engage in contract farming for a number of important food crops and oil palm. Due to weak management and operational abilities, a lack of resources, and fluctuating prices, particularly for non-consumable items, the majority of these large-scale commercial farms have not persisted in the post-independence era. Despite producing less marketable surplus and being University of Ghana http://ugspace.ug.edu.gh 26 insufficient to lift them out of poverty, the bulk of African farmers went to smallholder subsistence farming to survive. The four commercial agriculture models currently employed in the agrarian political economy are smallholder agriculture, contract farming, medium-scale independent farms, and plantation agriculture (Yaro, Teye, & Torvikey 2017). These models work together to draw synergies and occasionally compete for resources, as well as to increase social differentiation in rural areas. In terms of total acreage, the people participating, and its significance for food security, smallholder agriculture continues to dominate the other three models, while plantations make up the least amount of Ghana's commercial agriculture, contract farming and medium-scale farming are currently of interest to policymakers due to their role in the expanding horticultural industry and the policy discourse that views them as more sustainable approach to agricultural modernization that avoids pitfalls like the extensive peasant dispossession that comes with it. (Smalley, 2013; Sitko & Jayne 2014). Due to gender bias in hiring practices, the unequal access that males and females have to land and other resources, participation in these models continues to be sex-based. Women are therefore underrepresented in other agricultural models, despite having a good representation in smallholder agriculture. Additionally, there are still ideas about male and female crops in the agricultural system, which vary depending on the situation (Lambrecht et al. 2018). The majority of Ghana's impoverished are smallholder food crop farmers, despite their dominance in the country's commercial agriculture (Ghana Statistical Service, 2018). Long-standing policy views that see industrial agriculture as an idealized paradigm of agricultural modernization are the cause of this inconsistency. (Tsikata & Yaro 2014). University of Ghana http://ugspace.ug.edu.gh 27 2.3.3 Measuring Smallholder Agricultural Commercialisation While concentrating on commercialisation in its static form, several scholars have utilised various metrics of success to determine the agricultural commercialisation levels at the family level. For instance, von Braun and Kennedy (1994) proposed three categories of household commercialisation indices: a household's level of participation in the economic system, output and input side commercialisation, and rural economy commercialisation. The authors developed metrics to gauge the degree of household commercialisation for each of the three indices they had previously discovered. The first index measures proportion of agricultural output sold to the market and input acquired from market to the total value of agricultural production. For the second type, commercialisation of the rural economy is defined as the ratio of the value of goods and services acquired through market transactions to total household income. Here, it is assumed that some transactions might be made in kind, such as paying for land use with food items. Third, the ratio of the cash value of goods and services purchased to total household income is used to measure how much a household is integrated into the cash economy (von Braun & Kennedy, 1994). The Household Commercialisation Index (HCI), which measures the level of commercialisation unique to each household, was used by Govereh et al. (1999) and Strasberg et al. (1999). It is a ratio of the gross value of all crop sales per home per year to the gross value of total crop output. (𝐻𝐶𝐼 = 𝑇𝑜𝑡𝑎𝑙 𝑣𝑜𝑙𝑢𝑚𝑒 𝑜𝑓 𝑐𝑟𝑜𝑝 𝑠𝑜𝑙𝑑 𝑇𝑜𝑡𝑎𝑙 𝑣𝑜𝑙𝑢𝑚𝑒 𝑜𝑓 𝑐𝑟𝑜𝑝 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑 × 100). It's vital to note that this ratio excludes the livestock sector, which in some agricultural production may be more crucial than crops. Gabre-Madhin et al. (2007) recently evaluated the level of household commercialisation using sales-to-output and sales-to-income ratios, net and absolute market positions (as a net buyer, net seller, or self-sufficient family), income diversification, and level of agricultural production University of Ghana http://ugspace.ug.edu.gh 28 specialization. According to Gabre-Madhin et al. (2007), the sales-to-output ratio compares the total gross value of a household's agricultural sales to the total gross value of its agricultural production. Several writers have previously determined this ratio of agricultural output sold to total agricultural production (Abercrombie, 1961; Cleave, 1974; Ruthenburg, 1980 as referenced in Randolph, 1992; von Braun et al., 1994). The term "total sales-to-income ratio” refers to the gross value of all sales to all income from crop production. This index excludes revenue from livestock, off-farm sources, and non-farm sources in favor of using agricultural output income as a proxy for total family income. The sales and purchases ratio to total stock, which is the sum of storage from the prior production year and current production year, is used to assess a household's competitive position. The specialization index aims to measure the degree of specialization in farm households' production in order to take advantage of comparative advantages by producing what they are skilled at and outsourcing their less-skilled labor. According to this metric, families spend a certain percentage of the overall value of agricultural produce on agricultural goods. According to this review, the typical approach for evaluating the amount of smallholder farmer's commercialisation appears to rely on the ratio of sold agricultural output to purchased agricultural inputs. 2.4 Empirical Review Gebresilassie (2015) explored the factors that influence fertiliser use by smallholder farmers in Northern Ethiopia. Tobit model was used to econometrically analyse factors affecting fertiliser use. A total of twelve explanatory variables were used in the model. Based on the results of the analysis, it was discovered that six factors (household head, family size, distance from market, sex, access to credit, perception of household regarding cost of fertiliser, and farm size) influenced University of Ghana http://ugspace.ug.edu.gh 29 significantly the use of fertiliser by smallholder farmers. The study recommended taking into account socioeconomic traits and adoption factors while intervening in development via improved agriculture technologies. In the setting of Ghana, Hill and Kirwan (2015) investigated the variables that affect whether or not a farmer uses inorganic fertiliser. Their research was based on the assertion that Ghanaian farmers' methods may increase yields by closing the yield gap, which at the time was only around one-third of estimated potential. The researchers concluded that yields in Ghana may most likely be increased by strengthening the use of inorganic fertiliser, other inputs, and improved irrigation systems. According to the study's findings, the closeness of a farmer to the closest weekly marketplace, the presence of a pre-harvest agreement, and the presence of property rights on the field all have a major impact on fertiliser usage. Chapoto and Ragasa (2013) published empirical data on the response of maize production to fertiliser use and intensity, as well as the economics of fertiliser use with and without using cross-sectional data on 630 maize farmers and 645 maize plots in Ghana. Their research focused on the impact of fertiliser use and intensity, as well as the economic aspects of fertiliser use. The findings indicated a statistically significant positive effect of fertiliser application on maize production, aligning with previous studies in Ghana, where one kilogram of nitrogen led to a yield increase of 22 kilograms per hectare. Furthermore, the study revealed that factors such as the adoption of modern seed varieties, the utilization of livestock manure, herbicide application, and the total amount of family labor hours dedicated to working in the maize fields all contributed to higher maize yields. Plots fertilised with livestock manure, for example, had a 400-kilogram higher output, while plots treated with herbicide had a 170-kilogram higher yield. Plots planted with contemporary varieties also produced around 570 kilograms more University of Ghana http://ugspace.ug.edu.gh 30 per hectare than plots planted with traditional kinds. Their research findings highlighted a significant increase in yields when fertiliser treatment was combined with other agricultural inputs. Tesfay (2020) examined how the use of fertilisers influenced smallholder commercialisation as technological advances enhanced agricultural output and land-use intensification in a land-scarce context such as Ethiopia. The study employed cross-sectional farm household data gathered during the 2014–2015 cropping season from a randomly selected sample of 626 farm households located in rural Tigray, northern Ethiopia. With a control function technique, Ordinary Least Squares (OLS) was used to evaluate plot-level productivity. An endogenous switching regression model is used to analyse the direct influence of fertiliser adoption on smallholder farmers commercialisation in order to account for selection concerns connected to adoption decisions. The addition of fertiliser had a positive and considerable impact on plot-level productivity, according to the study's findings. The application of inorganic fertiliser was also found to have a large and positive impact on smallholder commercialisation through higher productivity. Using longitudinal household survey data, Xu et al. (2009) investigated in Zambia, the factors determining the profitability of fertiliser use on maize. The study categorized crop production inputs as growth inputs and yield scaling variables, which helped to broaden the asymmetric framework. The underlying crop growth process is considered in this paradigm, which also considers the effects of non-input elements. The study's findings demonstrated that timely fertiliser supply increases yields, whereas interaction with extension officers and an abundance of rain decreases them. Furthermore, the study revealed that estimates of nitrogen's Marginal Value-Cost Ratio (MVCR) and Average Value-Cost Ratio (AVCR) in various small-farm scenarios fell below the profitability threshold. Factors such as the rate of fertiliser application, reliable fertiliser supply, recent adult mortality rates, adoption of hybrid seeds, and the maize-fertiliser pricing ratio, University of Ghana http://ugspace.ug.edu.gh 31 influenced by factors like road and market accessibility, were identified as key determinants of fertiliser use profitability. Theriault, Smale, and Haider (2018) calculated the average and marginal value-cost ratios using estimated coefficients from the maize yield response function using farm household survey data over three cropping seasons (2009/10 to 2011/12) from Burkina Faso. Plot managers frequently apply fertiliser at a lower rate than the rate that maximizes revenues because farming is uncertain and fertiliser markets are undeveloped. The study's findings also demonstrated that while using fertiliser was lucrative with a 50% fertiliser subsidy, it was not profitable at full market costs. Even with the subsidies, the motivations to use fertiliser remained small, especially when transactional costs in the fertiliser supply are included. The study's findings back up Kousoubé and Nauges' (2017) conclusion that supply-side limitations must be eased for farmers to gain from fertiliser use. 2.5 Gaps in the Literature and Conclusion As identified in the literature review, numerous research studies have explored the impact of fertiliser use on maize commercialisation. Additionally, various research endeavours have investigated how fertiliser use affects the profitability of maize farmers. There is a need for more in-depth economic analyses that examine the actual profitability for smallholder farmers. This should consider input costs, market prices, and the overall financial viability of using inorganic fertilisers in different regions of Ghana. There is the need for more research on the long-term environmental consequences of intensive use if inorganic fertilisers including issues such as soil degradation and water pollution as understanding the sustainability of these practices is crucial for University of Ghana http://ugspace.ug.edu.gh 32 maize farming in the long run. The characteristics of inorganic fertiliser markets in Ghana, including pricing mechanisms, supply chain issues, and the influence of price volatility on farmers' decisions to invest in fertilisers, should be studied further. University of Ghana http://ugspace.ug.edu.gh 33 CHAPTER THREE METHODOLOGY 3.0 Introduction This chapter describes the methods and procedures used in this study. It begins with the theoretical framework and the conceptual framework underpinning the study. The chapter also includes the data analysis method for each of the objectives, the data collection, sampling techniques and a description of the study area. 3.1 Theoretical Framework Production function is a basic tool when conducting economic analysis of a firm. The production demonstrated the technological relationship between factors of inputs (land, labour, capital) and output. It is typically depicted by the marginal rate of returns on an input or set of inputs used in production. It is implicitly assumed that the production function of a firm, such as that of a farmer, operates in a technically efficient manner, meaning it is assumed to be characterized by diminishing returns to scale. Generally, the production function is defined as Q=f (K, L), where Q is the output produced from the use of capital (K) and labour (L). Such theoretical function is often defined practically using the Cobb-Douglas and translog production functional forms. The Cobb-Douglas production function, which was applied in this study, is one of the frequently used functions in economics to depict the relationship between inputs and outputs. It enables the direct estimation of the marginal rate of returns from the function itself. University of Ghana http://ugspace.ug.edu.gh 34 Previous research has shown a high correlation between rational decision-making and actions, or behaviours taken by farmers in the agricultural industry. For instance, it is typical for researchers and policymakers in agriculture to recognise that many smallholder farmers make rational decisions about the usage of their inputs, such as fertiliser (Rogers, 2010; Adejumo et al., 2014). This indicates that farmers are known to analyse the potential benefits and estimate the potential costs to be incurred in each situation before making decisions. Rational Choice Theory (RCT) is the most widely utilised theory to explain this occurrence (Boudon, 1998). Since RCT argues that individual action is instrumental, the motive or will of the actor to achieve particular goals serves as an explanation for the action taken by an individual (Boudon, 1998). According to RCT, an actor is subject to specific (individual and societal) limitations. He or she assesses the options in light of the limits and selects the one that best accommodates their preferences (Opp, 2019). In this situation, constraints limit the options available to the actor, while preferences define the objective they are trying to achieve. The core element of RCT is that individuals within a society make decisions in an effort to maximize their benefits and reduce their costs that reflect the patterns of behaviour in that community. RCT's applicability was extremely ingrained in agricultural organisations. It is thought that lowering the farmers' costs will lighten their burden and enhance their profit. Giving farmers agricultural subsidies is an example of how RCT is used. Farmers consent to subsidy programs because they understand the possible benefits of receiving the subsidy and the risks of not receiving it. The study sought to examine the effect of inorganic fertiliser use on farm commercialisation and profitability of smallholder maize farmers. Although, Ghanaian smallholder maize farmers are concentrated in the rural areas with farming largely as an inherited occupation, they do not University of Ghana http://ugspace.ug.edu.gh 35 arbitrarily make the decisions on farming and farming activities. Smallholder maize farmers do not use inorganic fertiliser at random, but rather follow a systematic decision-making process that considers the costs and benefits of using or not using inorganic fertiliser. 3.2 Conceptual Framework This study seeks to examine the effect of inorganic fertiliser use on farm commercialisation and profitability of maize farmers. This study’s conceptual framework is shown in Figure 3.1. It is assumed that inorganic fertiliser usage by farmers has the potential to improve soil fertility, leading to higher maize productivity, profit, and commercialisation among farmers. However, the utilization of inorganic fertilisers among farmers in developing countries, notably Ghana, remains at a low level, and there are numerous factors contributing to this low adoption rate. Some of the major factors attributed to low inorganic fertiliser usage could be high cost of inorganic fertiliser, poor access to inorganic fertiliser information and usage, inadequate access to production credit, gender issues, low access to market outlets, among others. It is crucial to note that using inorganic fertiliser, which is a farm input, increases cost of agricultural production, especially in maize production. However, appropriate combination of inorganic fertilisers, along with the right quantity of application, improved seeds, sufficient labour, improved land management practices, and favourable climatic conditions will result an increase maize yields and profitability. The profitability of any venture is principally a function of the cost incurred in that activity and revenues that are generated from the product of the activity, for instance, farm revenue. Therefore, smallholder farmers will use inorganic fertilisers at the farm level if the expected marginal revenue will be higher than the marginal cost of production. There University of Ghana http://ugspace.ug.edu.gh 36 are other socioeconomic factors such as the availability and distance to a market that also influences the profitability of farm activities. Also, increased yields mean that there are more grains for farmers beyond their subsistence levels. Therefore, the output of the farmers can be distributed in different ways. The increased yields can be divided into two broad ways: a proportion for consumption and a proportion for sale or commercial purposes. Important to this study is the proportion that is commercialised and this in addition to inorganic fertiliser use, influenced by other factors such as market access and credit access. University of Ghana http://ugspace.ug.edu.gh 37 Figure 3.1: Conceptual Framework Source: Author’s Construction Fertiliser Use Distribution of yield: Consumption, Commercialisation, etc Profitability Factors (e.g. Price, Access to info., Credit, etc) Cost of production Factors (e.g. Distance to market, Source of market, etc) Factors (e.g. Credit, Market access, etc) Expected Farm Revenue Factors (e.g. Seed, Labour, Land, Climatic conditions, etc) Increased yield University of Ghana http://ugspace.ug.edu.gh 38 3.3 Methods of Data Analysis The data was analysed using STATA, SPSS and Microsoft Excel. The analytical procedure was based on the study’s objective. This is detailed in the subsequent sub-sections. 3.3.1 Examine the factors that affect inorganic fertiliser use among smallholder maize farmers One of the objectives is to examine the socioeconomic factors affecting inorganic fertiliser usage among maize farmers in the Guinea Savannah and Transitional zones of Ghana. For the purpose of this study, the decision of a farmer to use inorganic fertiliser and quantity used (intensity of inorganic fertiliser usage) is referred to as inorganic fertiliser use/usage. An intricate web of socioeconomic, demographic, technical, and institutional indicators affect farmers behaviour to use inorganic fertiliser at farm level to increase productivity, especially in developing countries. Therefore, it is now essential to model farmers' responses to the use of inorganic fertiliser as well as the intensity of use. An input's adoption or usage, as well as its intensity of use, can theoretically be decided either jointly or separately (Gebremedhin & Swinton 2003). This flaw can be filled by the Cragg (1971) double-hurdle model, which has been widely used in a number of empirical research. When the double-hurdle approach is used, both hurdles—the choice to use and the level of use—have equations attached to them that take into account the effects of the farmer's conditions and traits. Such explanatory variables might appear in one, both, or neither of the equations. Most crucially, a variable that appears in both equations may have diametrically opposed effects (Teklewold et.al. 2006). Depending on how the adoption variable is measured, either as a decision or as intensity of adoption. University of Ghana http://ugspace.ug.edu.gh 39 In order to establish the variables that affect the application and intensity of inorganic fertiliser, a double hurdle model is used in this study. The double-hurdle model is a parametric version of the Probit model in which the application of inorganic fertiliser is determined by two different stochastic processes. Probit model forecasts the probability of factors of whether a smallholder farmer uses inorganic fertiliser or not. Because it could confine the utility value of the choice to adopt variable to fall between zero and one and because it could solve the heteroscedasticity problem, the Probit model was suitable (Bright, Victor & Daniel 2011). The model particularly permits the factors that affect the decision to adopt and the intensity of adoption to vary on their own (Temitayo & Kabir, 2016). The First Hurdle-Adoption Equation (𝑷𝒊) The double-hurdle model has inorganic fertiliser adoption equation given as: 𝑃𝑖 ∗ = 𝛽𝑖𝑋𝑖 + 𝜇𝑖 (3.1) 𝑃𝑖 = {0, 𝑖𝑓 𝑝𝑖∗ ≤ 0 1, 𝑖𝑓 𝑝𝑖∗> 0 (3.2) Where: 𝑃𝑖 ∗ is the latent variable that takes the value 1 if the smallholder maize farmer uses inorganic fertiliser and 0 if otherwise; 𝑋𝑖 is a vector of independent variables affecting the use of inorganic fertiliser by smallholder maize farmers; 𝛽𝑖 is a set of unknown parameters to be estimated; 𝜇𝑖is an error term which is normally distributed with mean (0) and standard deviation of 1, and captures all unmeasured variables. The empirical model employed to determine the inorganic fertiliser use is given as: 𝑃𝑖 = 𝛽0 + 𝛽1𝑆𝑒𝑥 + 𝛽2𝐴𝑔𝑒 + 𝛽3𝑀𝑎𝑖𝑧𝑒 𝑎𝑠 𝑚𝑎𝑗𝑜𝑟 𝑐𝑟𝑜𝑝 + 𝛽4𝑂𝑓𝑓 − 𝑓𝑎𝑟𝑚 + 𝛽5𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑠𝑐𝑎𝑙𝑒 + 𝛽6𝐶𝑟𝑒𝑑𝑖𝑡 𝑎𝑐𝑐𝑒𝑠𝑠 + 𝛽7𝐴𝑔𝑟𝑜𝑒𝑐𝑜𝑙𝑜𝑔𝑖𝑐𝑎𝑙 𝑧𝑜𝑛𝑒 + 𝛽8𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑝𝑢𝑟𝑝𝑜𝑠𝑒 + 𝛽9𝐻𝑜𝑚𝑒 𝑡𝑜 𝑓𝑎𝑟𝑚 𝑑𝑖𝑠𝑡𝑎𝑛𝑐𝑒 + 𝛽10𝑂𝑤𝑛 𝑙𝑎𝑛𝑑 + 𝛽11𝐸𝑑𝑢𝑐𝑎𝑡𝑖𝑜𝑛 + University of Ghana http://ugspace.ug.edu.gh 40 𝛽12𝐹𝐵𝑂 + 𝛽13𝐸𝑥𝑡𝑒𝑛𝑠𝑖𝑜𝑛 𝑎𝑐𝑐𝑒𝑠𝑠 + 𝛽14𝑈𝑠𝑒 𝑜𝑓 𝑖𝑚𝑝𝑟𝑜𝑣𝑒𝑑 𝑠𝑒𝑒𝑑𝑠 + 𝛽15𝑉𝑒𝑟𝑦 𝑓𝑒𝑟𝑡𝑖𝑙𝑒 + 𝛽16𝐹𝑒𝑟𝑡𝑖𝑙𝑒 + 𝛽17𝑈𝑛𝑖𝑡 𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑓𝑒𝑟𝑡𝑖𝑙𝑖𝑠𝑒𝑟 + 𝜇𝑖 (3.3) Where, 𝛽0 is the constant term, 𝛽1, 𝛽2, 𝛽3, … , 𝛽17 are the parameters of the respective explanatory variables in the model, and 𝜇𝑖 is the error term. The Second Hurdle-Outcome Model (intensity of inorganic fertiliser use) Determining the variables that affect the intensity of inorganic fertiliser application is the second stage of analysis. The extent of inorganic fertiliser use intensity is calculated using the truncated regression model in the second hurdle model. The intensity of inorganic fertiliser use 𝑌𝑖 can be modelled as: 𝑌𝑖 = 𝑄𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑜𝑓 𝐹𝑒𝑟𝑡𝑖𝑙𝑖𝑧𝑒𝑟 𝑈𝑠𝑒𝑑 (𝑘𝑔) 𝑇𝑜𝑡𝑎𝑙 𝐴𝑟𝑒𝑎 𝑜𝑓 𝐿𝑎𝑛𝑑 (𝐻𝑎) (3.4) The decision to intensify inorganic fertiliser use is modelled as a regression truncated below the average inorganic fertiliser use intensity as expressed below: 𝑌𝑖 ∗ = 𝑋𝑖𝛽 + 𝜇𝑖 , 𝜇𝑖~𝑁(0, 𝜎2) (3.5) 𝑌𝑖 = { 𝑌𝑖 ∗ 𝑖𝑓 𝑌𝑖 ∗ > 0 𝑎𝑛𝑑 𝑑𝑖 = 1 0 𝑖𝑓 𝑌𝑖 ∗ ≤ 𝑌0 𝑎𝑛𝑑 𝑑𝑖 ≤ 1 (3.6) Where 𝑌𝑖 is the inorganic fertiliser use intensity which depends on the latent variable 𝑌𝑖 ∗ being greater than zero and conditional to the decision to use inorganic fertiliser (𝑑𝑖), 𝑋𝑖 is the vector of explanatory variables hypothesized to influence inorganic fertiliser use intensity, 𝑌0 is the threshold inorganic fertiliser use intensity. The empirical model employed to determine the inorganic fertiliser use intensity is given as: University of Ghana http://ugspace.ug.edu.gh 41 𝑌𝑖 = 𝛽0 + 𝛽1𝑆𝑒𝑥 + 𝛽2𝐴𝑔𝑒 + 𝛽3𝑀𝑎𝑖𝑧𝑒 𝑎𝑠 𝑚𝑎𝑗𝑜𝑟 𝑐𝑟𝑜𝑝 + 𝛽4𝑂𝑓𝑓 − 𝑓𝑎𝑟𝑚 + 𝛽5𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑠𝑐𝑎𝑙𝑒 + 𝛽6𝐶𝑟𝑒𝑑𝑖𝑡 𝑎𝑐𝑐𝑒𝑠𝑠 + 𝛽7𝐴𝑔𝑟𝑜𝑒𝑐𝑜𝑙𝑜𝑔𝑖𝑐𝑎𝑙 𝑧𝑜𝑛𝑒 + 𝛽8𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑝𝑢𝑟𝑝𝑜𝑠𝑒 + 𝛽9𝐻𝑜𝑚𝑒 𝑡𝑜 𝑓𝑎𝑟𝑚 𝑑𝑖𝑠𝑡𝑎𝑛𝑐𝑒 + 𝛽10𝑂𝑤𝑛 𝑙𝑎𝑛𝑑 + 𝛽11𝐸𝑑𝑢𝑐𝑎𝑡𝑖𝑜𝑛 + 𝛽12𝐹𝐵𝑂 + 𝛽13𝐸𝑥𝑡𝑒𝑛𝑠𝑖𝑜𝑛 𝑎𝑐𝑐𝑒𝑠𝑠 + 𝛽14𝑈𝑠𝑒 𝑜𝑓 𝑖𝑚𝑝𝑟𝑜𝑣𝑒𝑑 𝑠𝑒𝑒𝑑𝑠 + 𝛽15𝑉𝑒𝑟𝑦 𝑓𝑒𝑟𝑡𝑖𝑙𝑒 + 𝛽16𝐹𝑒𝑟𝑡𝑖𝑙𝑒 + 𝛽17𝑈𝑛𝑖𝑡 𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑓𝑒𝑟𝑡𝑖𝑙𝑖𝑠𝑒𝑟 + 𝜇𝑖 (3.7) Where, 𝛽0 is the constant term, 𝛽1, 𝛽2, 𝛽3, … , 𝛽17 are the parameters of the respective explanatory variables in the model to be estimated, and 𝜇𝑖 is the error term. 3.3.2 Effect of inorganic fertiliser use on maize productivity This objective is to establish the relationship between inorganic fertiliser use by maize farmers and productivity in the study area. A linear regression was used to analyse this, yield was used as the dependent variable and inorganic fertiliser plus other production variables as the independent variables. A Cobb-Douglas functional form was fitted as: ln (𝑀𝑎𝑖𝑧𝑒 𝐹𝑎𝑟𝑚 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦) = 𝛽0 + 𝛽1 ln(𝑚𝑎𝑖𝑧𝑒 𝑓𝑎𝑟𝑚 𝑠𝑖𝑧𝑒) + 𝛽2𝐹𝑎𝑚𝑖𝑙𝑖𝑦 𝑙𝑎𝑏𝑜𝑢𝑟 + 𝛽3𝐻𝑖𝑟𝑒𝑑 𝑙𝑎𝑏𝑜𝑢𝑟 + 𝛽4𝑆𝑒𝑒𝑑 𝑒𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒 + 𝛽5𝑇𝑜𝑝 𝑑𝑟𝑒𝑠𝑠𝑖𝑛𝑔 𝑓𝑒𝑟𝑡𝑖𝑙𝑖𝑠𝑒𝑟 + 𝛽6𝐵𝑎𝑠𝑎𝑙 𝑓𝑒𝑟𝑡𝑖𝑙𝑖𝑠𝑒𝑟 + 𝛽7 (𝐵𝑎𝑠𝑎𝑙 𝑓𝑒𝑟𝑡𝑖𝑙𝑖𝑠𝑒𝑟 ∗ 𝐼𝑚𝑝𝑟𝑜𝑣𝑒𝑑 𝑆𝑒𝑒𝑑) + 𝛽8𝑃𝑒𝑠𝑡𝑖𝑐𝑖𝑑𝑒 𝐹𝑟𝑒𝑞𝑢𝑒𝑛𝑐𝑦 + 𝛽9𝐴𝑔𝑒 + 𝛽10 (𝐴𝑔𝑒 ∗ 𝑀𝑎𝑖𝑧𝑒 𝐸𝑥𝑝𝑒𝑟𝑖𝑒𝑛𝑐𝑒) + 𝛽11𝑆𝑒𝑥 + 𝜇𝑖 (3.8) Where, 𝛽0 is the constant term, 𝛽1, 𝛽2, 𝛽3, … , 𝛽11 are the parameters of the model’s respective explanatory variables, and 𝜇𝑖 is the error term. 3.3.3 Effect of inorganic fertiliser use on farm commercialisation by maize farmers This objective sought to analyse the effect of inorganic fertiliser use on farm commercialisation among maize farmers. Agricultural Household Commercialisation Index (HCI) was computed as a measure of the level of commercialisation. HCI measures the extent to which household crop University of Ghana http://ugspace.ug.edu.gh 42 production (in this case maize) is oriented towards the market. The HCI value ranges between 0 to 1 (or 0-100%). In interpreting the HCI, a value of zero (0%) signifies a household entirely focused on subsistence farming, while a value of 1 (100%) indicates a farmer fully engaged in market- oriented agricultural activities (fully commercialised farmer). The HCI is computed as: 𝐻𝐶𝐼 = 𝑇𝑜𝑡𝑎𝑙 𝑣𝑜𝑙𝑢𝑚𝑒 𝑜𝑓 𝑐𝑟𝑜𝑝 𝑠𝑜𝑙𝑑 𝑇𝑜𝑡𝑎𝑙 𝑣𝑜𝑙𝑢𝑚𝑒 𝑜𝑓 𝑐𝑟𝑜𝑝 𝑝𝑟𝑜𝑑𝑢𝑐𝑒𝑑 × 100 (3.9) A Tobit model was then used to estimate the effect of inorganic fertiliser use on the HCI of the maize farmers. The Tobit model assumes that the observed dependent variable 𝑌𝑖for observations 𝑗 = 1 … … … . 𝑛 satisfy: 𝑌𝑗 = max (𝑌𝑗 ∗. 0) (3.10) where 𝑌𝑗 are the latent variables derived from the classical linear regression model: 𝑌𝑗 = 𝛽′𝑋𝑗 + 𝑈𝑗 , 𝑌𝑗 = { 𝑌𝑗 ∗ 𝑖𝑓 𝑌𝑗 ∗ > 0 0 𝑖𝑓 𝑌𝑗 ∗ ≤ 0 (3.11) 𝑋𝑗 denotes vector of explanatory variables, 𝛽′ is the corresponding parameters to be estimated. 𝑈𝑗 are assumed to be independently normally distributed. The empirical model employed to examine the effect of inorganic fertiliser use on farm commercialisation by the research area's smallholder farmers are defined as: 𝑌𝑗 = 𝛽0+𝛽1𝑆𝑒𝑥 + 𝛽2𝐴𝑔𝑒 + 𝛽3𝑀𝑎𝑖𝑧𝑒 𝑎𝑠 𝑚𝑎𝑗𝑜𝑟 𝑐𝑟𝑜𝑝 + 𝛽4𝑂𝑓𝑓 − 𝑓𝑎𝑟𝑚 + 𝛽5𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑠𝑐𝑎𝑙𝑒 + 𝛽6𝐶𝑟𝑒𝑑𝑖𝑡 𝑎𝑐𝑐𝑒𝑠𝑠 + 𝛽7𝐴𝑔𝑟𝑜𝑒𝑐𝑜𝑙𝑜𝑔𝑖𝑐𝑎𝑙 𝑧𝑜𝑛𝑒 + 𝛽8𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑝𝑢𝑟𝑝𝑜𝑠𝑒 + 𝛽9𝐻𝑜𝑚𝑒 𝑡𝑜 𝑓𝑎𝑟𝑚 𝑑𝑖𝑠𝑡𝑎𝑛𝑐𝑒 + 𝛽10𝑂𝑤𝑛 𝑙𝑎𝑛𝑑 + 𝛽11𝐸𝑑𝑢𝑐𝑎𝑡𝑖𝑜𝑛 + 𝛽12𝐹𝐵𝑂 + 𝛽13𝐸𝑥𝑡𝑒𝑛𝑠𝑖𝑜𝑛 𝑎𝑐𝑐𝑒𝑠𝑠 + 𝛽14𝐸𝑥𝑝𝑒𝑟𝑖𝑒𝑛𝑐𝑒 + 𝛽15𝐻𝑜𝑢𝑠𝑒ℎ𝑜𝑙𝑑 𝑠𝑖𝑧𝑒 + 𝛽16𝐶𝑜𝑚𝑚𝑢𝑛𝑖𝑡𝑦 𝑚𝑎𝑟𝑘𝑒𝑡 + 𝛽17𝑀𝑎𝑖𝑧𝑒 𝑝𝑟𝑖𝑐𝑒 𝑖𝑛𝑓𝑜𝑟𝑚𝑎𝑡𝑖𝑜𝑛 + 𝛽18𝐹𝑒𝑟𝑡𝑖𝑙𝑖𝑠𝑒𝑟 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 + 𝜇𝑖 (3.12) University of Ghana http://ugspace.ug.edu.gh 43 where, 𝛽0 is the constant term, 𝛽1, 𝛽2, 𝛽3, … , 𝛽17 are the parameters of the model’s respective explanatory variables, and 𝜇𝑖 is the error term. 3.3.4 Effects of inorganic fertiliser use on farm profitability The objective analyses the effect of inorganic fertiliser use on maize farmers profitability. The profitability of inorganic fertiliser use was estimated using the Value Cost Ratio (VCR). The VCR is a common method for examining the financial incentives to use inorganic fertiliser. It is defined as the ratio of technical response to inorganic fertiliser uses and the fertiliser-output price ratio (Kelly, 2006). Following the definition, the VCR can be computed as: 𝑉𝐶𝑅 = 𝑂 𝑁 𝑃𝑁 𝑃𝑂 ⁄ Where: 𝑉𝐶𝑅= measure of profitability O = output of maize N = quantity of inorganic fertiliser used (nutrients) P = Price of inorganic fertiliser 𝑂 𝑁 = output-nutrient ratio (amount of maize output per N units of inorganic fertiliser) 𝑃𝑁 𝑃𝑂 = nutrient-output price ratio (the ratio of the cost per one unit of inorganic fertiliser to the value of one unit of output). If the VCR is greater than one, inorganic fertiliser use is profitable and incentivized because the value of the output generated exceeds the cost of the inorganic fertiliser; however, according to literature, the usual rule for developing countries is that the VCR must be greater than two before University of Ghana http://ugspace.ug.edu.gh 44 a farmer will consider applying inorganic fertiliser, and in certain high-risk conditions, the VCR may need to be as high as four (Morris et al. 2007). This is because farmers may face additional costs to applying fertiliser and they may face risks each year that could lower output, lowering their VCR. In this study, a farmer is considered profitable from inorganic fertiliser use if the VCR is greater than 2 and not profitable if the value is not more than two. Having estimated the VCR and classified into two, profitable and non-profitable farmers, a binary model, specifically the probit model, was estimated to determine the factors influencing the profitability of the farmers. The probability that inorganic fertiliser use is profitable for maize farmers is given by: 𝑃 ( 𝑌 = 1 𝑋 ) = 𝑃(𝑍𝑖 < 𝛽𝑜 + 𝛽𝑗𝑋𝑖𝑗) = 𝐹(𝑌𝑖) (3.13) 𝑃 (𝑌 = 1 𝑋 ) = 𝐹(𝑋𝐵) = 1 √2𝜋 ∫ 𝑒 −(𝑋𝐵)2 2 𝑋𝐵 −∞ 𝑑𝑥 (3.14) 𝑋 = (1, 𝑥1𝑖 , 𝑥2𝑖, … , 𝑥𝑘𝑖) (3.15) 𝛽′ = (𝛽0, 𝛽1, … , 𝛽𝑘) (3.16) Where 𝑃 (𝑌 = 1 𝑋 ) = is taken as the probability that the inorganic fertiliser use is profitable given the values of explanatory variables X, and where 𝑍𝑖 is a random variable normally distributed with mean zero and unit variance, 𝑍𝑖 ~𝑁(0, 𝜎2). The relative effect of each explanatory variable on the likelihood that inorganic fertiliser use will be profitable is specified as follows: 𝜕𝑃𝑖 𝜕𝑋𝑖𝑗 = 𝛽𝑖𝑗 ∗ 𝑓(𝑍𝑖) (3.17) University of Ghana http://ugspace.ug.edu.gh 45 where 𝑓(𝑍𝑖) is the inverse of the cumulative normal function and 𝛽𝑖𝑗 are the estimated parameters. The elasticity of the predicted probability is then computed as: 𝜕𝑃𝑖 𝜕𝑋𝑖𝑗 = 𝛽𝑖𝑗 ∗ 𝑓(𝑍𝑖) ∗ �̅� 𝑝𝑖 (3.18) The empirical model employed to determine the profitability of inorganic fertiliser use is given as: 𝑉𝐶𝑅 = 𝛽0 + 𝛽1𝑆𝑒𝑥 + 𝛽2𝐴𝑔𝑒 + 𝛽3𝐻𝐶𝐼 + 𝛽4𝑂𝑓𝑓 − 𝑓𝑎𝑟𝑚 + 𝛽5𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑠𝑐𝑎𝑙𝑒 + 𝛽6𝐶𝑟𝑒𝑑𝑖𝑡 𝑎𝑐𝑐𝑒𝑠𝑠 + 𝛽7𝐶𝑜𝑚𝑚𝑢𝑛𝑖𝑡𝑦 𝑚𝑎𝑟𝑘𝑒𝑡 + 𝛽8𝐶𝑎𝑟𝑡𝑖𝑛𝑔 𝑎𝑠𝑠𝑒𝑡 + 𝛽9𝐸𝑑𝑢𝑐𝑎𝑡𝑖𝑜𝑛 + 𝐸𝑥𝑝𝑒𝑟𝑖𝑒𝑛𝑐𝑒10 + 𝜇𝑖 (3.19) where, 𝛽0 is the constant term, 𝛽1, 𝛽2, 𝛽3, … , 𝛽17 are the parameters of the model’s respective explanatory variables, and 𝜇𝑖 is the error term. The double hurdle model delved into the decision-making process of farmers regarding inorganic fertiliser use. By establishing two hurdles, the first hurdle identified the factors influencing the initial decision to use or refrain from fertilisers. Subsequently, the second model further explored the factors affecting the intensity of inorganic fertiliser use among those who chose to make use of it. Following this, a linear regression analysis uncovered the relationship between inorganic fertiliser use and maize productivity. This analysis revealed how changes in inorganic fertiliser use from the double hurdle model can influence the productivity of maize crops. Having established the role of inorganic fertilisers in productivity improvement, it is important to understand the commercialisation of the output of the farmers and the role of the use of inorganic fertilisers in influencing the extent to which the farmers commercialise their outputs. The level of commercialisation among maize farmers was measured through the Household Commercialisation Index (HCI). A Tobit model was then employed to explore the effect of inorganic fertiliser use on commercialisation. Finally, the Value-Cost Ratio (VCR) analysed the profitability of inorganic University of Ghana http://ugspace.ug.edu.gh 46 fertiliser use in maize farming, providing insights into the economics of inorganic fertiliser use in relation to maize production, as a way of ensuring that beyond the potential roles of inorganic fertiliser use in increasing productivity and commercialisation among farmers, its use remain economic viable investment among the farmers. Overall, these points together offer a holistic analysis of the role of inorganic fertiliser use in improving the productivity, commercialisation, and profitability among maize farmers. University of Ghana http://ugspace.ug.edu.gh 47 3.4 Description of Variables Table 3.1 presents the definition and measurement of the variables that have been used in the study. Table 3.1: Description of Variables Variable Definition A priori expectations Dependent variables Fertiliser use decision Fertiliser use intensity Maize productivity Maize commercialisation Maize Profitability HCI The proportion of total volumes of output sold to total production volume + VCR A measure of the product of the maize yield response to inorganic fertiliser and the fertiliser-output price ratio Inorganic fertiliser usage Dummy: 1 if farmer uses inorganic fertiliser and 0 if not + Inorganic fertiliser intensity Kilogram per hectare Independent variables Sex Dummy: 1 if farmer is a male and 0 if a female + + + + Age The total number of years from birth to the time of the data collection - - + - + Maize as major crop Dummy: 1 if the farmer cultivated maize as a major crop and 0 if a secondary crop + + + Off-farm Dummy: 1 if farmer engaged in any economic activity in addition to farming and 0 if not - + + + Production scale Dummy: 1 if the farmer cultivated more than 2ha of maize and 0 if 2ha or less + + - University of Ghana http://ugspace.ug.edu.gh 48 Variable Definition A priori expectations Credit access Dummy: 1 if farmer had access to credit during the production season and 0 if not + + - + Agroecological zone Dummy: 1 if the farmer is located in Guinea Savannah zone and 0 if in the Transitional zone + - - + Production purpose Dummy: 1 if the primary aim of producing maize is for home consumption and 0 if for sale + + + Home to farm distance The total distance from the farmer's residence to the farm in kilometres - - Own land Dummy: 1 if the farmer cultivated maize on his/her own land and 0 if not - - + Top-dressing fertiliser Dummy: 1 if the farmer uses top-dressing of fertilisers and 0 if not + Basal fertiliser Dummy: 1 if the farmer uses basal dressing of fertilisers and 0 if not + Maize farm size Hectare (Ha) + Family labour Number of family labour per hectare - Hired labour Number of hired labour per hectare - Education the total number of years of formal education - - - + + FBO Dummy: 1 if farmer belonged to an FBO and 0 if not - - + + Extension access Dummy: 1 if the farmer had access to extension and 0 if not + - - + Use of improved seeds Dummy: 1 if the farmer used an improved maize seed variety and 0 if local seed + + Unit price of fertiliser The price per kilogram of fertiliser + Pesticide Number of times pesticides are used per hectare + University of Ghana http://ugspace.ug.edu.gh 49 Variable Definition A priori expectations Seed expenditure Ghana Cedis per Hectare (GHS/Ha) + Ready market Dummy: 1 if the farmer had access to ready market and 0 if not + Community market Dummy: 1 if the farmer had access to community market centres and 0 if not + Very fertile Dummy: 1 if the farmer perceived that he/she can obtain maximum/expected yield on farmland without external inorganic fertiliser application and 0 if the land cannot be used for maize production without fertiliser application - - Fertile Dummy: 1 if the farmer perceived that he/she can obtain some yield on farmland but can only obtain expected yield with an external inorganic fertiliser application and 0 if the land cannot be used for maize production without inorganic fertiliser application - - Maize price information Dummy: 1 if farmer had access to maize price information and 0 if not + Household size The number of people in the household - Experience The number of years the farmer has been engaged in farming + + Fertiliser use Dummy: 1 if farmer applied the right quantity of inorganic fertilisers and 0 if not + Carting asset Dummy: 1 if farmer own any of bicycle, motorbike, motorking (aboboya), donkey or a car and 0 if own none of these University of Ghana http://ugspace.ug.edu.gh 50 3.5 Data Collection and Sampling Techniques This data for this study is a subset data of a larger dataset collected with other students. The larger dataset was obtained through a multistage sampling procedure. Purposive sampling was employed in the first stage to choose eight regions in the Guinea Savannah and Transitional ecological zones. These regions were purposively selected because of their high involvement in maize production and the implementation of several agricultural programs including International Fertilizer Development Center’s (IFDC) Fertilizer Research and Responsible Implementation (FERARI) program. In each of the regions, two districts were randomly selected in the second stage from a pool of districts considered by FERARI in its past studies. This was to ensure that the results generated in this study can be favourably compared with previous studies in the districts. In the third stage, simple random sampling was used to select four communities in each selected district, resulting in a total of 64 communities for the study. In the final stage, 12 farmers were randomly selected from each of these chosen communities, making a total of 768 farmers. However, among the 768 farmers, there were individuals engaged in cultivating