GlobalGAP compliance costs in Ghana’s small-scale pineapple farming sector

Abstract

When farmers implement GlobalGAP they incur specific input costs that arise from quality requirements of the technology. However, due to the difficultly in observing and measuring food quality, previous empirical studies seldom analysed the relationship between quality improvements in food production and total costs of production. They assumed that product quality itself was exogenous and hence had no effect on productive efficiency or cost of production. This study estimates the impact of GlobalGAP on costs of production while accounting for fixed cost improvements and quality endogeneity. Data were obtained from GlobalGAP-certified small-scale pineapple farmers in Ghana. The hypothesis that product quality was exogenous was tested and rejected. Consequently, a quality-adjusted translog cost function was used to identify the main contributors to cost increases on small-scale GlobalGAP-certified pineapple farms. The estimated function exhibited economies of size, implying that most small-scale adopters are unable to increase output and benefit from lower average costs. Production costs arising from improvements in quality imposed by GlobalGAP are most sensitive to changes in plantlet price, followed by wages, agrochemical price and expenditure on capital items. Smaller small-scale farmers are much more sensitive to increases in capital expenditure than are larger small-scale farmers. Key policy recommendations include joint ventures to increase nursery capacity and competition in the market for plantlets, scrutiny of mandatory fees impacting the cost of imported labour-saving inputs, facilitating sharing arrangements between smallholders to lower the cost of on-farm infrastructure, and research to identify constraints preventing certified farmers from exploiting size economies.