Date of Graduation

12-2014

Document Type

Thesis

Degree Name

Master of Science in Agricultural Economics (MS)

Degree Level

Graduate

Department

Agricultural Economics and Agribusiness

Advisor

Lawton L. Nalley

Committee Member

Marijke D'Haese

Second Committee Member

Rebecca A. Asare

Third Committee Member

Jennie S. Popp

Fourth Committee Member

Bruce L. Dixon

Keywords

Agricultural Economics, Climate Change, Crop Insurance, Deforestation, Ghana, Index Insurance

Abstract

This study was motivated by the fact that Ghanaian cocoa producers face lower yields than other main cocoa producing counties which in turn increases food insecurity for smallholder producers. In addition, low yields experienced by Ghanaian producers is a driving factor for forest degradation and deforestation as cocoa producers encroach further into previously undisturbed forests in efforts to increase their incomes. There are currently production methods to achieve higher yields readily available in Ghana; however, many producers choose not to adopt these methods because they are seen as too risky, or simply cannot adopt them due to financial/credit constraints. A common rationale for producers not adopting new technologies is that smallholder producers are risk averse and find it difficult to risk the little capital they may have. Smallholder producers frequently forego opportunities because they are vulnerable to adverse shocks such as crop failure that can move them into or deeper into poverty. Crop insurance could mitigate these risks but there is currently no crop insurance available for cocoa in Ghana. The Climate-Smart Cocoa (CSC) Working Group has proposed offering crop insurance for producers who follow the practices of CSC. This study estimated the average yields and yield variation (risk) between two groups of producers: (1) those who followed CSC practices: have training for efficient agrochemical input usage, used inorganic fertilizer, and practiced shade management (appendix 5) and (2) those who did not use CSC practices: no input-use training, no shade management, but did use inorganic fertilizer. The objectives of this study were: (1) to estimate yield differences among producers who follow CSC and non-CSC practices (2) estimate the impact of CSC practices on risk (i.e. yield variation) using percent chance of indemnity payments to producers and relative standard deviation of yield as measurements, and (3) estimate potential revenue gains through following CSC practices. To investigate these objectives, a regression model was estimated to predict cocoa yields using historical yield for 19 districts in Ghana for the copping seasons of 2010-2011 and 2011-2012. Regression results were then used to identify average yields at the district level, yield variance, and fair-market premiums for producers who followed CSC practices and those who did not in 19 districts of Ghana. The results of the study show that producers who followed the CSC recommended practices had higher yields, less risk, and higher gross revenue in every district of the study. Meaning, producers can obtain higher incomes by following CSC on lands that are already under cocoa cultivation as well as income stability through crop insurance. By obtaining these benefits, producers are not allowed to encroach into undisturbed forests and remain in the CSC program. Therefore, CSC can not only increase farm income but also reduce deforestation.

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