Economic Viability of Smallholder Agriculture in the Savannah and Transitional Zones of Ghana: Implications of Farm Output Commercialization and Farm Diversification

Abstract

Smallholder agriculture remains the heart of Ghana’s food crop production and crucial to meet the zero-hunger target. Unfortunately, rural households continue to see no significant improvement in their livelihoods, as poverty and food insecurity remain high in these areas. This has raised concerns about the economic viability of smallholder agriculture in Ghana. We estimated propensity score matching on a sample of 581 farmers to determine the economic viability of the smallholder farmers and the impact of farm output commercialization and off-farm diversification on their food security and welfare status. Large-scale (>2 ha) maize production led to 8% more yield and 96% more income than small-scale (≤2 ha) production. At observed mean levels, large-scale farmers performed better in most of the livelihood outcomes. The impact of diversification and commercialization on livelihood outcomes was mixed, based on the scale of production. For small-scale farmers, diversification reduced per capita consumption expenditure, while commercialization improved food security, consumption expenditure, and income. For large-scale farmers, diversification improved yield and food security, while commercialization improved fertilizer application rate and income but reduced yield. Although small-scale farmers are not necessarily doomed, the heterogeneity of farmers’ production scale should be considered in the design of rural agricultural policies.