Efficiency of Value Creation in Farm-Based Cocoa Production: Evidence from the Eastern Region of Ghana

This study investigates the efficiency of value creation among cocoa farmers in Ghana's Eastern region by applying a stochastic frontier Economic Value Added (EVA) function to cross-sectional survey data. Constraints to cocoa production were identified and evaluated to assess their relative impacts on productivity. The results indicated that a significant majority of the farmers created value with high relative efficiencies, achieving a mean efficiency of 94.3% of the frontier firm's value output, with low variability in their EVA efficiency for cocoa production. However, this suggests that farmers could create and capture approximately 5.7% more value using the same production resources, assuming that input and product market conditions remain constant. Farmers demonstrated labor inefficiency, with increases in labor leading to a negative impact on EVA. Additionally, holding high levels of operating capital negatively affected EVA efficiency, while subsidies, grants, and experience in cocoa farming were shown to enhance farm-level EVA efficiency. The farmers also reported that high input prices, market access issues, and on-farm operational challenges, such as pest and disease control and pesticide application, constrained their operations. Public policies aimed at improving cocoa production should introduce targeted subsidy support to alleviate the high input costs faced by the farmers.