Relative Producer Price, Cross Border Smuggling and Productivity in Ghana’s Cocoa Industry

Abstract

Producer price differences between Ghana and its neighbours for an internationally traded commodity such as cocoa can be a recipe for smuggling. Against this background, price distortions can explain reported low productivity of cocoa in Ghana. This paper investigates the effect of price differences between Ghana on one hand and Cote d’Ivoire and Togo on the other hand on cocoa yields for Ghana using an autoregressive distributed lag (ARDL) cointegration model based on time series data spanning 1961 through 2017. We also estimates the volumes of cocoa smuggled from Ghana between 2000 and 2017. The study finds higher foreign producer price relative to Ghana reduces yields in cocoa in the short run, but improves on yields in the long run. Nationally an average of 40 kilograms per hectare of cocoa was lost to the country through smuggling between 1999/2000 and 2016/17. The study observes efforts has been made since 2001 to improve input support to the industry while enhancing price incentives to support productivity growth. Despite such interventions in the past two to three decades, illegal cross border trading appears to persists.

Keywords: Producer price, Relative price, Smuggling, Productivity, Cocoa

DOI: 10.7176/JESD/14-8-08

Publication date: April 30^th 2023