Does Scale Matter in Profitability of Small Scale Broiler Agribusiness Production in Ghana? A Translog Profit Function Model

Abstract

This paper examined whether scale matter in profitability of small-scale commercial broiler agribusinessproduction in Ghana, using the translog profit function model. Structured questionnaire was used to collectprimary data on input and output prices and quantities from four hundred and forty-one (441) small-scalecommercial broiler agribusinesses for the 2010 production year through a multiple-stage random samplingtechnique. Descriptive statistics and multiple regression analysis were used to analyze data collected for thestudy. Findings of the study show that by incurring an average variable cost of GH¢8.48 per broiler and sellingeach at GH¢14.80, small-scale broiler agribusinesses make a profit of GH¢5.59 per bird. Results of the translogprofit function model indicate that feed and day-old chick prices are the two main factors that negatively andsignificantly affect profit in small-scale commercial broiler agribusiness production. Stock size of small-scalebroiler agribusinesses was also found to positively and significantly affect profit in broiler production. Thisimplies that profit of small-scale broiler agribusinesses increases with scale, hence scale matters in profitabilityof broiler production. Policy actions directed towards broiler producers to increase their production scale in orderto reduce cost and increase profit should be encouraged.Keywords: Scale, Profitability, Broiler, Agribusiness, Production, Translog, Ghana