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Contract and Exit Decisions in Finisher Hog Production

  • Fengxia Dong
  • David A. Hennessy
  • Helen H. Jensen

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. Copyright 2010, Oxford University Press.

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

Volume (Year): 92 (2010)
Issue (Month): 3 ()
Pages: 667-684

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Handle: RePEc:oup:ajagec:v:92:y:2010:i:3:p:667-684
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  1. Väre, Minna & Heshmati, Almas, 2004. "Perspectives on the Early Retirement Decisions of Farming Couples," IZA Discussion Papers 1342, Institute for the Study of Labor (IZA).
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