Analysis of output price risk of cassava in the Volta region of Ghana

Abstract

Output price risk has been a perennial challenge to cassava farmers due to their inability to foresee and quantify the level of risk associated with the price of their produce. It was against this background that the study analysed output price risk of cassava in the Volta region of Ghana. Primary data were collected from 500 sampled cassava farmers using structured interview schedule and analysed using descriptive statistics whilst secondary data were analysed using procedures such as historical value-at-risk, cointegration and standard regression analysis. The results indicated that Cassava price increases significantly over times with high level of volatility between each period. Additionally, cassava farmers face the risk of losing Gh¢1.35 per 91kg at 95% confidence level, representing about 31% (Gh¢179millions ) of their annual revenues Inflation and exchange rate significantly determine the price of cassava while cassava yield, inflation and exchange rate are significant determinants of cassava price volatility. Crop diversification, off-farm business, varying harvesting time, and reduce farm size were the major risk management strategies used by the farmers in the study area while lack of readily available market, poor processing facilities, land tenure system, insufficient fund, and imperfect information regarding price changes were the major constraints facing farmers' in adapting to output price risk. Based on the finding of the study, it is recommended that policies stabilizing inflation, exchange rate, establishment of price controls, designing output risk insurance, and training farmers in value addition will help address the challenge.