Contract and Exit Decisions in Finisher Hog Production

18 Pages Posted: 6 Apr 2020

See all articles by Helen H. Jensen

Helen H. Jensen

Iowa State University - Department of Economics

David Hennessy

Iowa State University

Date Written: April 2010

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.

Keywords: agricultural industrialization, Agricultural Resource Management Survey (ARMS), farm exit, hog production, production contracts, recursive bivariate probit

Suggested Citation

Jensen, Helen H. and Hennessy, David, Contract and Exit Decisions in Finisher Hog Production (April 2010). American Journal of Agricultural Economics, Vol. 92, Issue 3, pp. 667-684, 2010, Available at SSRN: https://ssrn.com/abstract=3569173 or http://dx.doi.org/10.1093/ajae/aap041

Helen H. Jensen (Contact Author)

Iowa State University - Department of Economics ( email )

260 Heady Hall
Ames, IA 50011
United States
515-294-6253 (Phone)
515-294-6336 (Fax)

David Hennessy

Iowa State University

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