Contract and Exit Decisions in Finisher Hog Production

Finisher hog production in North America has shifted toward larger units and contract format since 1990. Exit among independent growers has been high. We develop a model showing that growers with any of three efficiency attributes (lower innate hazard of exit, variable costs, or contract adoption co...

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Bibliographic Details
Published in:American journal of agricultural economics 2010-04, Vol.92 (3), p.667-684
Main Authors: Dong, Fengxia, Hennessy, David A., Jensen, Helen H.
Format: Article
Language:English
Subjects:
Agricultural economics
agricultural industrialization
Agricultural production
Agricultural Resource Management Survey (ARMS)
Agricultural resources
Capital costs
Commercial production
Contracts
Cost analysis
Cost efficiency
Crops
D23
Economic models
Family farms
farm exit
hog production
Hogs
Industrial agriculture
J26
J43
Livestock
Market exit
Market structure
Meat industry
Meat market
Pigs
production contracts
Production costs
Q12
recursive bivariate probit
Specialization
Studies
U.S.A
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Summary:Finisher hog production in North America has shifted toward larger units and contract format since 1990. Exit among independent growers has been high. We develop a model showing that growers with any of three efficiency attributes (lower innate hazard of exit, variable costs, or contract adoption costs) are more likely to contract, produce more, and expend more on business protection. Using 2004 Agricultural Resource Management Survey data, a recursive bivariate probit model confirms that contracting producers are less likely to exit. Specialization increases the probability of contracting. Education, nonfarm income, and older production facilities are significant in increasing expected exit.
ISSN:0002-9092
1467-8276
DOI:10.1093/ajae/aap041