Production Risk And Technical Efficiency of Irrigated Rice Farmers in The Greater Accra And Volta Regions of Ghana

ABSTRACT

This study aims to contribute to a better understanding of the possible causes of production volatility that has characterized rice production in the Greater Accra and Volta Regions of Ghana. The output gap that exists between actual yield and achievable yield presents an opportunity for output growth. Using cross sectional data, this study presents an empirical analysis of production risk and technical efficiency of 356 irrigated rice farms from the two regions. This study adopts the stochastic frontier model with flexible risk properties to estimate the level of technical efficiencies whiles accounting for production risk. Thus production variability is assessed from two sources, production risk and technical efficiency. A single stage maximization likelihood estimation using STATA 12 is considered to provide the estimates of the mean output, production risk and technical inefficiency models. This study also attempts to determine some socioeconomic characteristics and management practices which influence technical efficiency of rice production in the study area. The findings demonstrate that the transcendental logarithmic (translog) production frontier is the best fit model for the mean output function. There is also the presence of technical inefficiency and production risk in the production process. The technical inefficiency effects are related to the exogenous variables. Input variables (scaled per hectare) such as fertilizer, seed, other cost and mechanization cost positively influence rice output whilst labour negatively influences rice output. The study also shows that farms in the study area exhibit increasing returns to scale. Fertilizer and mechanization cost reduce output risk whilst labour, seed and other cost increase output risk. The mean technical efficiency for the study area is 83.7 percent. There is a significant difference in mean technical efficiencies for irrigated rice farms in Greater Accra and Volta Regions. This study concludes that production risk and technical inefficiency prevents the rice farmers from realizing their frontier output. The best farm practices that improve upon the efficiency of the rice farmers in the study area include; employing the method of transplanting, the use of a harrow for tillage and the use of combined harvesters for harvesting. It was also realized that the extension services present in the area had very little influence on farmer efficiency. This study recommends that inputs for rice production should be made readily available, affordable and accessible to farmers so that more may be employed to further increase output. The quantity of labour employed on the other hand should be reduced since an addition to labour would only be an addition to cost and not output. It further recommends the use of mechanized equipment and fertilizer as an effective means to mitigate the effect of production risk in the irrigated rice production process. The extension and advisory services in the study area must be repackaged to enhance their effectiveness and impact in the study area. Farmers should also be encouraged to v use best agronomic practices through the extension and advisory services to help improve technical efficiency.