Cost-Benefit Analysis and Potential Spillover Effects of Farmer Field Schools in Sub-Saharan Africa: The Case of Cocoa

This thesis consists of two studies analyzing the first phase of the Cocoa Livelihood Program (CLP-I), a current World Cocoa Foundation (WCF) development project, sponsored by the Bill and Melinda Gates Foundation and aimed at improving the livelihood of small scale cocoa producers in Sub-Saharan Africa. The first study uses a difference-in-differences econometric model to estimate yield enhancements attributable to farmer field schools which CLP implements. The results show a 32%, 34%, 50% and 62% increase in cocoa yield for Ghana, Côte d’Ivoire, Nigeria and Cameroon, respectively. These yield enhancements have the potential to increase income by 26%, 29%, 48%, and 87% for cocoa farmers in Ghana, Côte d’Ivoire, Nigeria and Cameroon, respectively. The benefit-cost ratios of the program are estimated to range from US $18- US$62. Building on the results from the econometric analysis, the second study develops a Farm Household Model to analyze the direct cocoa market and indirect spillover effects of CLP and demand expansion on equilibrium price and quantities in the Ghanaian food and cocoa markets, and welfare. The results show that net welfare gains are higher for CLP households relative to non-CLP households. The spillover effects in the maize, cassava, and yam markets are minimal while the rice market experiences a modest increase in its price. The net welfare for Ghana and the world are both positive. Sensitivity analysis shows that cocoa price declines as the CLP participation rate increases and rises as world cocoa demand expands. Also, at a CLP participation rate greater than 59%, net gains from the program in Ghana become negative due to a declining cocoa price as supply increases. Based on these results, CLP could be expanded from its current rate of 6.25% of cocoa farmers to 59%. However without demand expansion, expanding CLP participation beyond 59%, will lead to welfare losses in Ghana. Hence, marketing and cocoa demand expansion are equally as important as production expansion to increase rural farm household income. Hence, marketing and cocoa demand expansion are equally as important as production expansion to increase rural farm household income. Given the expected increase in world cocoa demand, this is a crucial time to promote Sub-Sahara African cocoa and further establish supply links in this burgeoning market

Implications of Non-Farm Work to Vulnerability to Food Poverty-Recent Evidence From Northern Ghana

SummaryUsing survey data from northern Ghana, this study seeks to establish the impact of participation in non-farm work on the vulnerability of resource poor households to food poverty. Vulnerability to food poverty is assessed based on expected future food expenditure of households. The potential endogeneity problem associated with participation in non-farm work by households is overcome using a novel instrumental variable approach. Analysis of the determinants of expected future food expenditure is done using a standard Feasible Generalized Least Squares (FGLS) method. Demographic and socioeconomic variables, location variables, and household facilities are included in the model as control variables. Our study finds that participation in non-farm work significantly increased the future expected food consumption, thereby alleviating the vulnerability of households to food poverty. Our study also confirms that current food poverty and future food poverty, i.e., vulnerability to food poverty, are not independent from each other. Non-farm work plays a crucial role in providing the means to overcome the risk of food poverty in these resource poor households. Policies that promote off-farm income generating activities, such as small businesses and self-employment, as well as the creation and support of businesses that absorb extra labor from the farm, should be encouraged in the study region. Because households in the study region are exposed to above average levels of hunger and food poverty, the study recommends the government of Ghana and development partners to take measures that enhance the resilience of these resource poor households

Econometric identification of crop insurance participation

This paper shows how econometric identification can be improved in studies making use of crop insurance participation as either an independent or dependent variable. The paper provides the reader with a succinct overview of how crop insurance contracts are priced and how to use publicly available data to derive a novel composite crop insurance design parameter that emulates existing crop insurance rating parameters using a procedure that is based on current actuarial practices. The derived design parameter performs well at predicting historic crop insurance loss-cost ratios and satisfies the requirements for an instrumental variable for a variety of empirical applications related to crop insurance. Representative empirical examples are presented where it is shown that the proposed instrument has favorable two-staged least squares diagnostic tests and is effective at eliminating endogeneity bias

Utilizing geo-referenced and “big-ag” data to improve US agricultural policy

Doctor of PhilosophyDepartment of Agricultural EconomicsJesse B. TackStudy 1: Utilizing Topographic and Soil Features to Improve Rating for Farm-level Insurance Products Previous studies have shown a strong correlation between topographic/soil features and agricultural production; however, linkages between these features and agricultural insurance products are scarce. Agricultural insurance is an ever-growing means of governmental support for producers globally. However, failure to set insurance premiums that accurately reflect risk exposure can lead to low participation rates and/or adverse selection. The U.S. federal crop insurance program partly guards against this at the farm-level by inducing pricing heterogeneity via a rate multiplier curve, which does not consider topographic/soil information. We develop a method for econometrically incorporating this information into existing rating procedures used by the Risk Management Agency (RMA). The empirical application leverages 149,267 farm-level observations of Kansas producers across four dryland crops (corn, soybean, sorghum, and wheat), spanning 46 years, and matched to fine-scale topographic/soil features. The results suggest that incorporating these features does improve the prediction accuracy of yield losses and can, in general, improve rating performance. However, these improvements are specific to farms with limited yield histories, as there are no improvements for farms with the commonly used yield history of ten years. This suggests substantial rating improvements for new farms or those with limited histories for a particular crop, but more general improvements for the program are not likely to occur given a large number of current participants with a full ten-year yield history. Study 2: Tradeoffs Between Production-History-Based and Index-Based Insurance for Field Crops Agricultural insurance products based on Actual Production History (APH) typically suffer from adverse selection, moral hazard, and high program costs associated with pricing, loss assessment, and monitoring. On the contrary, Index-based insurance offers the opportunity of reducing, and even sometimes eliminating, some of these concerns; however, by design, they cannot guarantee that indemnities will be paid when producers experience losses. This concern is commonly referred to as basis risk and is the biggest limiting factor in the potential expansion of Index insurance programs. An extensive body of literature has shown that basis risk could be reduced to an appreciable extent by improving product design. Nonetheless, a knowledge gap on farm-level tradeoffs between APH- and Index-based insurance exists because observable data is limited. The novelty of this study is that it overcomes these limitations and extends the literature by providing ex-post simulated evidence of the tradeoffs between Index-based and APH-based insurance at the farm level. Using a sample of 5,428 corn, soybean, sorghum, and wheat KS farms from 1973-2018 the study shows that economically significant tradeoffs do exist between APH- and Index-based insurance and that different types of index products are associated with differing levels of basis risk. Index-based insurance that protects against killing-degree-days (i.e., degree-days >30 °C) accumulation generates the most significant gains in economic rents and is associated with relatively low basis risk. Study 3: The Potential Significance of “Big Ag Data” in Corn Futures Markets The advent of precision agriculture technologies has left researchers to grapple with how to best-use its associated “Big Ag-Data”. While the wealth of information output from precision equipment can easily be aggregated to a higher level in real-time, this poses an interesting question of whether aggregated real-time data will be relevant vis-à-vis periodic information from public sources. To this end, this study utilized advances in event study and yield projection methodologies to test the potential market value of simulated live streamed yield monitor data vis-à-vis USDA report yields. The results shows that the market for corn exhibits only semi-strong form efficiency, as the “news” provided by the monthly Crop Production and World Agricultural Supply and Demand Estimates reports is incorporated into prices in at most two days after the release. As expected, an increase in corn yields relative to what was publicly known, elicits a futures price decrease. On the contrary, live-streamed yield information does not significantly correlate with historic market reactions. Nonetheless, this study advances the market-price event-study methodology by utilizing sources of information not previously considered. Second, the study provides policy implications centered around the ongoing debate about the economic significance of USDA reports in the presence of growing information availability in the private sector

Pasture, Rangeland, and Forage Drive Increased Participation in Federal Crop Insurance Program

Farmers use the Federal Crop Insurance Program (FCIP) as a tool to manage revenue variations attributable to yield and price fluctuations. While traditional field crops like corn, soybeans, and wheat historically have accounted for most of the acres insured by the program, forage crops now make up an increasing portion. The Federal program includes the Pasture, Rangeland, and Forage insurance plan, which covers producers when a lack of precipitation occurs that can result in a loss of forage for grazing or for hay. Increasing participation in this plan has contributed to the majority of growth in FCIP-insured acreage over the last several years. However, the relatively lower value of forage means its contribution to other measures of participation is less prominent

Effects of biotic and abiotic stress on household cocoa yields in Ghana

Few empirical studies have estimated the direct effects of biotic (disease and pest) and abiotic (e.g. drought and flood) stresses on cocoa-producing households. As such, this study extends the existing literature by using household-level data from Ghana over three cocoa growing seasons (2002, 2004 and 2006) in a regression framework to estimate the responsiveness of cocoa yields to biotic and abiotic stress at the household level. The results show that, for farms exposed per year, overall stress from pests makes up the highest percentage, followed by disease stresses and abiotic stresses. In addition, the results from the regression model show that cocoa yields decline by 0.046%, 0.013% and 0.003% respectively for every one percent increase in the proportion of the farm affected by disease, pests and abiotic stress that persist for a year. The findings of this study suggest that the government of Ghana should consider expanding the scope of the National Cocoa Diseases and Pest Control Programme to include other pests that are not included in the programme. We also recommend an insurance product for cocoa to help farmers manage the risks of abiotic stresses such as droughts and floods that destroy investments and potential income

Vegetable production technical efficiency and technology gaps in Ghana

This study characterises the nature of the vegetable production shortfall throughout Ghana for remedial action to be taken. By applying the meta-stochastic frontier analysis to a sample of okra, pepper and tomato farmers, the results show that the ranking of production inputs in production is in the order land, hired labour, fertiliser, pesticide and family labour. Furthermore, the results also suggest that vegetable production is characterised by diseconomies of scale. Technical efficiency for okra, pepper and tomato farmers in Ghana is estimated at 54%, 74% and 58% respectively, and this has generally increased for okra and pepper but remained stable for tomato. Technology gaps are close to non-existent for pepper cultivation, modest for tomato, and severe for okra. This implies that, whilst there is no potential for production gain from redistributing pepper technology throughout Ghana, there is limited potential for tomato and substantial potential for okra. Pepper farmers could potentially benefit from managerial improvements