Survival of the Ayensu starch processing company: A technical efficiency evaluation

Abstract

The cultivation of cassava is vital for the production of industrial starch by the Ayensu Starch Processing Company in Ghana. The main constraint for starch production has been the unreliability of cassava supply to the factory. This paper estimates technical efficiency of out-growers under the Ayensu Starch Processing Company and identifies sources of efficiency using plot-level data. Stochastic frontier production function was used to estimate the efficiency indices while an econometric analysis of factors affecting the efficiency indices is conducted using the parametric two-step point method. We find that farmers producing cassava are inefficient, with a mean efficiency score of 58% across farms ranging from 2% to 99%. On the basis of the OLS estimation of the determinants of Technical Efficiency, plot size, farm distance and club membership were noted to be negatively significantly related to efficiency while years of farming experience, adoption of hybrid cassava and mono-cropping turned out positively significant. The study recommends that management of the company should negotiate lease of laud for the farmers, the road infrastructure should be improved to allow easy access of the farmers to the factory, the out-growers should be encouraged to practise mono-cropping of cassava, the farmers should be given improved varieties of the cassava and the company finds incentives that will attract and retain young and experienced farmers to boost the supply of cassava to the factory.