Examining the Profitability, Financial Efficiency and Constraints among Cotton Farmers in Ghana

This study assessed the profitability, financial efficiency, and constraints among smallholder cotton
farmers, using data from a farm household survey in Northern Ghana. Measures such as Asset
Turnover Ratio, Operating Expense Ratio, Depreciation Expense Ratio, and Net Farm Income Ratio
were computed from the dataset, and used to examine the financial efficiency levels of smallholder
cotton farmers in the area. Moreover, constraints faced by these farmers were also identified and
examined. The results revealed mixed findings regarding the financial efficiency levels of these
farmers. Comparing financial efficiency ratios to the benchmark figures, Asset Turnover Ratio
(20.28%), Operating Expense Ratio (74.1%) and Net Farm Income Ratio (19.14%) suggest that
smallholder cotton farmers in Ghana are financially inefficient, but efficient regarding Depreciation
Expense Ratio (3.29%). Constraints such as incidence of pest and diseases, poor pricing of seed
cotton, untimely input supply by cotton companies, difficulty in acquiring labour, bad weather
conditions, and lack of access to land, cash credit, and tractor services were identified as facing the
cotton farmers in Ghana. Intensified collaborative efforts by the government, NGOs in the cotton
sector, private cotton companies, and other cotton stakeholders in building farmers’ technical and
financial capacities, providing input subsidies, and in setting fair cotton prices could ameliorate the
constraints, while enabling them to handle the cotton production business efficiently.