Did the price-related reforms in Ghana's cocoa sector favour farmers?

William Quarmine, Rein Haagsma, Arnold van Huis, Owuraku Sakyi-Dawson, Daniel Obeng-Ofori, Felix A. Asante

Research output: Contribution to journalArticlepeer-review

9 Citations (Scopus)

Abstract

It is generally hypothesized in the innovation systems literature that institutions can create production incentives for farmers. This paper examines whether the introduction in 1984 of the Producer Price Review Committee (PPRC) in Ghana's cocoa sector has improved the transmission of world prices to farmers. We test how fast and to what extent world prices have been transmitted, and also address the stability of the prices received by cocoa farmers. For the period 1960-2011, the results were as follows: (1) the production of cocoa beans depended positively on the prices farmers received and negatively on price variance; (2) the establishment of the PPRC provided higher prices for farmers; and (3) the PPRC's use of the flexible freight on board (FOB) price-setting rule resulted in a better price transmission than the employed cost-plus-margin approach. However, under the FOB price-setting rule, producer price variance rose sharply. We conclude that, although FOB pricing mechanisms are often recommended for markets where prices are institutionally determined, stabilization policies should be factored in to protect farmers against international price fluctuations.

Original languageEnglish
Pages (from-to)248-262
Number of pages15
JournalInternational Journal of Agricultural Sustainability
Volume12
Issue number3
DOIs
Publication statusPublished - Jul 2014
Externally publishedYes

Keywords

  • cocoa
  • institutions
  • market reforms
  • marketing boards
  • price incentives
  • price stability
  • price transmission

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