There is an interesting paper published in January of this year (2022) entitled ‘Buffer Stock Operations and Well-Being: The Case of Smallholder Farmers in Ghana’ which appeared in the Journal of Happiness Studies. The study was done by the University of Accra in Ghana and the University of Groningen in the Netherlands and was led by Professor Emmanuel Abokyi. It has implications for every farmer in the world.
The Government of Ghana introduced a food buffer stock policy in 2010. The article explains that this pricing mechanism involves setting floor and ceiling prices. The government lets the market price of grain move up and down but prevents the ups and downs from becoming excessive. We have argued that it is good to let the market price move up and down, because this means that market forces (supply and demand) are working. But it is not good if the ‘ups’ are too big because consumers may not be able to afford to buy grain to feed their families. And it is not good if the ‘downs’ are too deep because farmers will not make a profit from growing grain and end up quitting farming.
By setting up a buffer stock, the Government of Ghana can keep the price of grain within a price band. This is hugely beneficial to both farmers and consumers. The result is that grain remains affordable (people can eat) and farming is profitable (farmers have an incentive to farm and to produce grain). This is precisely the policy which we are advocating. The price of grain within Ghana is stable. Price hikes and prices slumps are avoided – to everyone’s benefit. The alternative is a volatile market price where from time-to-time ordinary families cannot afford to feed themselves and at other times farming is not profitable.
The article recognises that when prices of farm produce continue to fall, farmers are likely to choose alternative crops with higher expected economic value (e.g., cocoa or cashew), and in the long run this could reduce the supply of grain. Income instability makes smallholder households more uncertain about their future, and so makes living in rural areas less attractive. Hence farmers are liable to leave farming altogether and some may even feel they can no longer find work in Ghana. Once again, we have argued that a prosperous farming section is necessary if the country itself is to be prosperous. Price (and hence income) instability drives unemployment and sometimes, waves of migration as people leave the countryside – and even their countries – in search of a living elsewhere.
The purpose of the study was to examine whether a buffer stock increases farmers’ well-being. The study was assiduous in its attention to methodology, in separating the concepts of objective and subjective well-being and in statistical rigour. It found that when farmers participated in the buffer stock scheme, their subjective well-being rose by 15% and their objective well-being rose by 20%. The study concludes that ‘a public buffer stock … is a viable tool for improving the well-being of smallholder farmers in a developing country.’
Farmers the world over are like the smallholder farmers of Ghana. The big farmers of the Great Plains in the United States, the large family farms of the Canadian prairies, the capital-intensive farms of France and Germany – are all like the smallholder farmers of Ghana because they are all exposed to the vagaries and vicissitudes of the world market. If a buffer stock can improve the well-being of farmers in Ghana, so it can improve the well-being of farmers in every other country of the world, simply because a buffer stock takes away much of the price risk of farming. With a public buffer stock, farmers know that they will be able to sell what they plant at a reasonable profit.
The farmers of Ghana are fortunate to have a government that relieves them from the debilitating headache of volatile grain prices.