IDEAS home Printed from
   My bibliography  Save this paper

Contract and Exit Decisions in Finisher Hog Production



Finisher hog production in North America has seen a shift toward larger production units and contract-organized production since around 1990. Given the efficiency gains and conversion costs associated with contract production, growers may have to choose between long-term commitment through investments and atrophy with intent to exit in the intermediate term. A model is developed to show that growers with any of three efficiency attributes (lower innate hazard of exit, variable costs, or fixed contract adoption costs) are not only more likely to contract but will also produce more and expend more on lowering business survival risks. Using the 2004 U.S. Agricultural Resource Management Survey for hogs, a recursive bivariate probit model is estimated in which exit is affected directly and also indirectly through the contract decision. It is confirmed that contracting producers are less likely to exit. Greater specialization and regional effects are important in increasing the probability of contracting. More education, having non-farm income, and older production facilities are significant factors in increasing the expected rate of exit. The findings suggest further exits by non-contract producers.

Suggested Citation

  • Fengxia Dong & David A. Hennessy & Helen H. Jensen, 2008. "Contract and Exit Decisions in Finisher Hog Production," Center for Agricultural and Rural Development (CARD) Publications 08-wp469, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  • Handle: RePEc:ias:cpaper:08-wp469

    Download full text from publisher

    File URL:
    File Function: Full Text
    Download Restriction: no

    File URL:
    File Function: Online Synopsis
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    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).
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Li, Na & Vyn, Richard & McEwan, Ken, 2015. "To Invest or to Sell? The Impacts of Ontario's Greenbelt on Farm Exit and Investment Decisions," 2015 Conference, August 9-14, 2015, Milan, Italy 212049, International Association of Agricultural Economists.
    2. Key, Nigel, 2013. "Production Contracts and Farm Business Growth and Survival," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 45(02), pages 277-293, May.
    3. Kuo-Liang Chang & George Langelett & Andrew Waugh, 2011. "Health, Health Insurance, and Decision to Exit from Farming," Journal of Family and Economic Issues, Springer, vol. 32(2), pages 356-372, June.
    4. Dong, Fengxia & Hennessy, David A. & Jensen, Helen H., 2013. "Size, Productivity and Exit Decisions in Dairy Farms," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150339, Agricultural and Applied Economics Association.
    5. Saint-Cyr, Legrand D. F., 2016. "Accounting for farm heterogeneity in the assessment of agricultural policy impacts on structural change," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 235778, Agricultural and Applied Economics Association.

    More about this item


    agricultural industrialization; hog production; occupation choice; production contracts; recursive bivariate probit; relationship-specific investments; sector dynamics.;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ias:cpaper:08-wp469. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.