Date of Graduation

12-2011

Document Type

Thesis

Degree Name

Master of Science in Agricultural Economics (MS)

Degree Level

Graduate

Department

Agricultural Economics and Agribusiness

Advisor

L. Lanier Nalley

Committee Member

Bruce L. Dixon

Second Committee Member

Jennie S. Popp

Third Committee Member

Ethan Budiansky

Abstract

The objective of this study is to empirically estimate the optimum annual replacement rate and age of replacement of cocoa trees in order to maximize the net present value of four production practices over time. The study examines the costs and returns of four common cocoa production systems in Ghana associated with changes in cocoa prices, fertilizer prices, inflation rates, and labor prices. While this study focuses on cocoa, the method is applicable to any tree crop industry. This study uses empirical yield curves and cost of production data from Ghana to determine when and what percentage of a cocoa orchard should be replaced to maximize net present value revenues over time. Successive versions of the model are solved to determine how input and output price changes affect optimal replacement rates and replacement ages. The Excel based model could provide extension personnel in low-income countries with a simple yet powerful tool to illustrate to producers the benefits of tree replacement. Given that producers in both high- and low-income countries are reluctant to cull still productive assets, such as trees that are diminishing in yield over 100 years, this study illustrates the economic benefits of replacing such trees at the optimal time and rate.

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