Profitability and technical efficiency analyses of small scale palm oil processing in the Assin North and South Districts of Ghana

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This study analyses profitability and technical efficiency of small scale palm oil processors in Assin North Municipality (ANM) and Assin South District (ASD) of Ghana. The study used primary data collected during the 2011/ 20012 production season for analysis. The data was collected through the use of structured questionnaires administered on one hundred and fifty (150) small scale palm oil processors who were selected through a simple random sampling technique. Descriptive statistics were used to examine the socio-economic characteristics of the respondents. Gross Margin (GM) and Benefit/Cost Ratio (BCR) were the main financial tools used to assess financial viability of small scale palm oil processing. Maximum Likelihood Estimation of the Stochastic Production Frontier was employed to examine Technical Efficiency (TE) levels among the processors. The values obtained from GM and BCR analyses showed that small scale palm oil processing is financially profitable in both major (peak) and minor (lean) seasons. Results of the TE analysis indicated that the level of TE varies across processors and ranges from 54.2% - 99.4% with a mean of 92.4% suggesting that on the average crude palm oil output falls 7.6% short of the maximum possible level. The TE level is positively correlated with the level of education, experience and membership of association, but unexpectedly negatively correlated with access to credit. Kendall‘s Coefficient of Concordance analysis of constraints militating against the industry showed that access to credit is the most constraining factor followed closely by transportation cost, labour cost and bad state of rural road network. The study recommended that policies that would improve, formation of active processing based associations, functional literacy and capacity building programmes for processors and rural road network should be pursued by central and local government structures in the study areas to further improve the profitability and TE in the industry in the study area.
This thesis is submitted to the Department Of Agricultural Economics, Agribusiness and Extension, in partial fulfillment of the requirements for the degree of Master of Philosophy in Agricultural Economics, 2014