Financial analysis of shaded cocoa in Ghana |
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Authors: | Beatrice Darko Obiri Geoff A Bright Morag A McDonald Luke C N Anglaaere Joseph Cobbina |
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Institution: | (1) Forestry Research Institute of Ghana, P.O. Box 63, UST Kumasi, Ghana;(2) School of the Environment and Natural Resources, University of Wales, Bangor, Gwynedd, LL57 2UW, UK |
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Abstract: | The cultivation of cocoa has been an important driver of tropical deforestation globally. Efforts to reverse this trend are
focusing on the reintroduction of shade trees to cocoa plantations. Shade trees are valuable in enhancing biophysical conditions
on cocoa (Theobroma cacao) fields and contribute to biodiversity and product diversification for smallholder producers. Participatory trials of cocoa
agroforests planted with indigenous shade tree species were undertaken with farmers in the Atwima District of the Ashanti
Region of Ghana, to increase tree volume on cocoa fields while improving rural livelihoods and enhancing environmental sustainability.
An ex ante financial analysis of the technology was undertaken to assess its economic viability. Input–output data were collected
from farmer experiments over three seasons and supplemented with data from traditional cocoa fields of varying rotation ages,
and secondary data on production in later years of an eighty-year cocoa rotation. A discounted cash flow analysis was carried
out to estimate the benefit-cost (B/C) ratio, net present value (NPV), internal rate of return (IRR) and land expectation
value (LEV) as well as the sensitivity to a 20% decline in cocoa prices and additional chemical costs for various shade scenarios
at a 10% discount rate. It was observed that cocoa production is, in general, profitable. The change from the traditional
system to one with hybrid cocoa raised the IRR from 31% to 57% with planted shade and 67% without, although extra agrochemical
costs would tend to reduce the profitability of unshaded hybrid cocoa in particular. The age of maximum LEV for the various
scenarios suggests that the optimum economic rotation for the hybrid cocoa is between 18 and 29 years, much less than the
traditional system. |
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Keywords: | Biodiversity Indigenous shade trees Profitability LEV NPV IRR |
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