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Risk Preferences and Contracting In the U.S. Hog Industry

Published online by Cambridge University Press:  28 April 2015

C. Scott Johnson  and
Kenneth A. Foster
C. Scott Johnson
Affiliation:
Capital Agricultural Property Services, Inc. Champaign, IL
Kenneth A. Foster
Affiliation:
Department of Agricultural Economics, Purdue University, West Lafayette, IN
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Abstract

Much of the increase use of vertical coordination in the U.S. swine industry has taken place through contract production. While the incidence of contracting is much higher in non-traditional hog production areas, a growing number of Midwestern producers are being faced with contract options. A variety of contractual arrangements are available through feed companies, integrators, genetics firms, and packers. However, little is known about the profitability and risk characteristics of these alternatives. This research suggests that risk neutral producers in the Midwest would prefer independent production, and risk averse producers would prefer to choose among the various types of coordination arrangements.

Keywords

RiskStochastic Dominancecontract productionswine
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 26 , Issue 2 , December 1994 , pp. 393 - 405
Copyright
Copyright © Southern Agricultural Economics Association 1994

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