Analyzing Profitability of Maize, Rice, and Soybean Production in Ghana: Results of PAM and DEA Analysis

The study combines policy analysis matrix (PAM) and data envelopment analysis (DEA) techniques to evaluate the profitability and competitiveness of maize, rice, and soybean production in Ghana. The efficiency of a sample of maize, rice, and soybean growers from four districts of Ghana is analyzed using DEA, while profit maximizing groups of farmers were also identified. Then, PAMs were computed under observed average and profit-efficient farming conditions. Two alternative profit functions were considered: including family labor in domestic cost factor and excluding family labor from domestic cost factor. The results are distinctively different under observed average and profit maximizing conditions. One may argue that average maize, rice, and soybean farmers are not viable in the long term because they are making losses at social prices. However, efficient farmers make substantial positive profits and the society also makes welfare gains from resources allocated to maize and soybean production. Therefore, policies based on dissemination of best practices could improve overall efficiency of these cropping systems. Rice production does not seem profitable in social prices even for efficient farmers. Finally, excluding family labor from domestic cost factor provides different perspectives that point to the ability of maize, rice, and soybean production to create value for farmers and also to add welfare gains to the society.