Analysis of Factors Influencing Output and Cost of Soybean Production: A Comparison between Contract and Non-contract Farmers in the Northern Region of Ghana

Abstract

Contract farming has emerged as a crucial remedy for bolstering the prospects of small-scale soybean farmers in Ghana. Both governmental bodies and non-governmental organizations, including the Savanna Farmers Marketing Company (SFMC), the Northern Development Authority (NDA), and the Adventist Development and Relief Agency (ADRA), are actively engaging farmers in contracts to grow soybeans. This initiative is especially prominent in the Northern Region of Ghana. This study investigates the factors influencing the output and cost of soybean production, drawing a comparison between contract and non-contract farmers. The research employs stochastic frontier analysis (SFA) and translog functional forms to analyze data collected from 374 soybean growers. The findings reveal that farm size, labour, and agrochemical usage significantly impact soybean output for both contract and non-contract farmers. However, contract farmers exhibit increasing returns to scale, while non-contract farmers experience decreasing returns. Regarding production costs, the study identifies farm size, seed cost, agrochemical cost, and output as significant determinants for the pooled sample. Contract farmers' production costs are primarily influenced by farm size, seed cost, and agrochemicals, whereas non-contract farmers' costs are driven by farm size, seed cost, agrochemicals, and output. The analysis highlights the complementary and substitute relationships among input variables, providing valuable insights for policymakers and stakeholders in the soybean industry. The findings underscore the need for targeted interventions to enhance productivity and cost efficiency for both contract and non-contract soybean farmers.