There is a cruel irony in every bumper harvest. When the rains arrive, the soil yields, and markets overflow with produce, agriculture’s success can become the farmer’s punishment. Prices fall. Consumers rejoice. Governments point to slowing inflation as proof of sound economic management. But quietly, farmers begin the calculation that matters most: whether it is worth planting again next season. Too often, the answer is no.
Ghana has experienced price disinflation in the last 12 months. Much of the public discourse has attributed it to the appreciation of the cedi, but the role of lower food prices in driving this disinflation has been underappreciated. We argue in this article that the Bank of Ghana and fiscal authorities must get involved in the agriculture value chain in order to guard and sustain the macroeconomic gains associated with lower food prices in a similar way as they have done with the Goldbod.
A Good Harvest, A Bad Balance Sheet
The relationship between agricultural supply and price is unforgiving in its simplicity. When supply rises sharply, prices often fall, sometimes faster than production costs can adjust. Many smallholder farmers in developing economies operate on margins so thin that even modest price declines can push them into loss. In Ghana, reports from parts of the 2025 harvest season suggest that some farmers experienced steep farm gate price declines, in certain cases exceeding 50-80 percent depending on crop and location. We know this because our own cost of food has fallen.
The problem is structural. Unlike industrial producers, smallholder farmers cannot easily hedge against price volatility through futures markets, nor can they afford idle capacity. They spend on seeds, fertiliser, labour, and water long before a single farm gate price is known. When prices collapse after harvest, the financial pain is immediate and often severe. Yet in the national accounts, the picture appears encouraging. Lower food prices reduce the Consumer Price Index. Inflation eases. The Bank of Ghana gains room to hold or even reduce interest rates. Government can point to a macroeconomic win. But even as the economy appears healthier, the farmer is going bankrupt.
The Danger of the Following Season
Faced with losses, or even the fear of them, farmers make rational individual decisions that are collectively catastrophic. They plant less. They switch to lower-input, lower-yield crops. Some abandon farming altogether. Not because they want to, but because their capital has been eroded and debt leaves them unable to sustain previous levels of production. Periods of low food prices driven by oversupply are often followed, within one to three planting seasons, by supply contraction and renewed price spikes, sometimes worse than the inflation governments had earlier celebrated reducing. The danger is clear: today’s cheap food could become tomorrow’s inflation problem.
Food is a Strategic Asset
Too often, food security is treated as a welfare issue, something affecting only farmers or the rural poor, rather than a matter of national interest. This is a costly mistake. Food is, in the clearest strategic sense, an issue of national sovereignty. Countries that cannot secure their own food supply are vulnerable to external price shocks, import dependence, and political instability. Nations that outsource food security often outsource part of their monetary stability along with it.
History offers a clear warning. During the 2007-2008 global food crisis, international wheat and rice prices more than doubled within months, exposing how quickly food import dependence can trigger macroeconomic instability. Countries with strong food reserves and agricultural support systems were better insulated from the worst effects. Those without them faced inflation, currency pressure, and in some cases, social unrest. .
What we can do
The solution is not to artificially inflate food prices for consumers, nor to sustain inefficient farming through open-ended subsidies. Equally, it is not to leave farmers entirely at the mercy of volatile markets. What is required is a structured, strategic intervention, one that protects producers today in order to preserve supply, and therefore price stability, tomorrow. Fortunately, several practical and well-tested policy tools already exist.
Minimum Price Guarantees and Procurement Programmes
The most direct intervention is for government to act as a buyer of last resort, purchasing produce at a minimum support price that covers farmers’ production costs and provides a modest margin.
This is not a novel idea. India’s Minimum Support Price (MSP) programme has, for decades, helped prevent large-scale exits from staple crop farming during periods of weak prices. Brazil’s CONAB (National Supply Company) similarly intervenes during price collapses to stabilise farmer incomes.
The lesson is not that such systems are flawless or should be replicated wholesale, but that carefully designed and fiscally disciplined intervention can help stabilise production when markets fail. The cost of such programmes should be weighed against the far greater economic cost of rebuilding agricultural supply after it has already contracted.
Strategic Food Reserves and Storage Infrastructure
Procurement only works if purchased produce can be stored. Yet government either lacks adequate storage infrastructure, such as grain silos, cold-chain facilities, and warehousing, or fail to use existing capacity efficiently. Crucially, the government need not build all of this itself.
Warehouse receipt systems, which incentivise private storage operators to hold certified stocks, have been deployed successfully in countries such as Kenya, Tanzania, and Ethiopia, and to a more limited extent in Ghana. Ghana’s own experience with the National Food Buffer Stock Company illustrates both the importance of strategic reserves and the implementation challenges that come with them. The lesson is simple: such systems may be difficult to manage, but storage and reserve capacity remain essential to stabilising food supply and prices.
Counter-Cyclical Market Release
Once produce is in storage, government gains a targeted stabilisation tool that operates without directly relying on interest-rate or exchange-rate adjustments. When food prices rise, as they are likely to do in the medium term, given global climate variability, rising input costs, and population growth, the release of strategic reserves into domestic markets can dampen inflation directly, at the source, rather than through blunt monetary policy instruments.
China’s management of its grain reserves, the United States’ Commodity Credit Corporation, and the European Union’s intervention storage mechanisms all function on this principle. For Ghana, where food prices heavily influence inflation dynamics, strategic reserves could become an important complement to monetary policy rather than a substitute for it.
The Monetary Policy Dimension
For Ghana, food security is not merely an agricultural concern. It is a monetary policy issue. Because food prices play a disproportionate role in inflation dynamics, sharp increases in food costs often leave the Bank of Ghana with an uncomfortable choice: tighten monetary policy or risk inflation becoming entrenched. A government that holds strategic food reserves can intervene on prices without the central bank having to act. Strategic reserves therefore provide an additional stabilisation tool, allowing government to ease price pressures at source while leaving interest rates free to respond to broader economic conditions. This is why agricultural stability should matter to monetary authorities.
Conclusion: Buy Now, or Pay Later
A government that allows farmers to absorb the full cost of a price collapse without intervention is not exercising fiscal discipline. It is deferring a much larger economic bill. Farmers who plant less after a season of losses are not making a political statement. They are making a rational calculation. The question for Ghana is whether policymakers will respond before the next harvest exposes the cost of inaction.
The Bank of Ghana cannot afford to be indifferent to food prices if food inflation remains central to macroeconomic stability. Food security is not a welfare programme. It is an economic imperative. Treat it as such, or risk discovering too late that today’s cheap food was only tomorrow’s inflation delayed.