RISK, PREFERENCES AND ADAPTATION STRATEGIES OF FARMERS IN GHANA

Risk and uncertainty are ubiquitous and varied within the agricultural sector coming from a wide range of factors including vagaries of weather, the unpredictable nature of biophysical processes, market cycles and enabling environment. This study was used to investigate how weather risk and climate shocks and other agricultural inputs impact real per capita income from food crop production in Ghana. An econometric model to estimate a stochastic production function that quantifies the effects of these variables on the mean, variance and skewness of real per capita income was adopted. The results show that average temperature has a significant concave relationship on real per capita income, indicating that rising average temperature increases real per capita income but the increase in real per capita income diminishes as average temperature increases above a maximum 27.78°C. Precipitation on the other hand does not have any significant effect on real per capita income on the average. It was, however, found to have a risk decreasing effect on the variability in real per capita income but increases the probability of crop failure resulting in low real per capita income. It was also revealed that, whereas variability in average temperature was found to reduce the probability of crop failure, variability in annual total precipitation was found to increase the probability of crop failure and thus reduces real per capita income. Future research will focus on how different degree of exposure to the risk flood impact on the behavioral traits of farmers and their decision-making process in adopting adaptation strategies.