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Vertical Integration in the Pork Industry

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  • Jeffrey J. Reimer

Abstract

This article provides an economic explanation regarding why the share of U.S. pork raised on company-owned farms with hired management (integration) is increasing relative to production through independently owned-and-operated contract growers (contracting). The article develops a property rights model that shows how in certain circumstances production contracts do not transfer sufficient control over the use of production assets to intermediaries. On the other hand, integration removes certain grower incentives, with the result that production on company farms tends to be relatively costly. Practical examples of factors that influence the likelihood of full integration are emphasized. Copyright 2006, Oxford University Press.

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File URL: http://hdl.handle.net/10.1111/j.1467-8276.2006.00850.x
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Bibliographic Info

Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 88 (2006)
Issue (Month): 1 ()
Pages: 234-248

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Handle: RePEc:oup:ajagec:v:88:y:2006:i:1:p:234-248

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Cited by:
  1. Hueth, Brent & Ligon, Ethan & Dimitri, Carolyn, 2007. "AJAE Appendix: Agricultural Contracts: Data and Research Needs," American Journal of Agricultural Economics Appendices, Agricultural and Applied Economics Association, vol. 89(5), December.
  2. Kostas Karantininis & Jesper T. Graversen, 2008. "Relational contracts and adaptation: application to a pork producer contract," Agribusiness, John Wiley & Sons, Ltd., vol. 24(3), pages 342-354.
  3. Berardi, Nicoletta & Seabright, Paul, 2010. "Joint Ventures as a Commitment Device Against Lobbies," CEPR Discussion Papers 7714, C.E.P.R. Discussion Papers.
  4. Du, Ying & Stiegert, Kyle W., 2009. "Strategic Vertical Pricing in the U.S. Butter Market," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 51712, Agricultural and Applied Economics Association.
  5. Reimer Jeffrey J, 2008. "Search Costs in Identity-Preserved Agricultural Markets," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 6(1), pages 1-20, October.
  6. Franken, Jason R.V. & Parcell, Joseph L. & Patterson, David J. & Smith, Michael F. & Poock, Scott, . "Cow-Calf Producer Interest in Retained Ownership," Journal of Agribusiness, Agricultural Economics Association of Georgia.
  7. Michael Ollinger, 2008. "The Direct and Indirect Costs of Food Safety Regulation," Working Papers 08-31, Center for Economic Studies, U.S. Census Bureau.
  8. Franken, Jason R.V. & Pennings, Joost M.E. & Garcia, Philip, 2009. "Do Transaction Costs and Risk Preferences Influence Marketing Arrangements in the Illinois Hog Industry?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 34(2), August.
  9. Hu, Y. & Hendrikse, G.W.J., 2007. "Allocation of Decision Rights in Fruit and Vegetable Contracts in China," ERIM Report Series Research in Management ERS-2007-077-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
  10. Ollinger, Michael & Moore, Danna L., 2009. "The Interplay of Regulation and Marketing Incentives in Providing Food Safety," Economic Research Report 55837, United States Department of Agriculture, Economic Research Service.
  11. Traversac, Jean-Baptiste & Rousset, Sylvain & Perrier-Cornet, Philippe, 2011. "Farm resources, transaction costs and forward integration in agriculture: Evidence from French wine producers," Food Policy, Elsevier, vol. 36(6), pages 839-847.

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