Title

Contract and Exit Decisions in Finisher Hog Production

Campus Units

Economics, Center for Agricultural and Rural Development

Document Type

Article

Publication Version

Submitted Manuscript

Publication Date

4-2010

Journal or Book Title

American Journal of Agricultural Economics

Volume

92

Issue

3

First Page or Article ID Number

667

Last Page

684

DOI

10.1093/ajae/aap041

Abstract

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.

JEL Classification

D23, J26, J43, Q12

Comments

This is a working paper of an article from American Journal of Agricultural Economics 92 (2010): 667, doi: 10.1093/ajae/aap041.