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Contract and Exit Decisions in Finisher Hog Production

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

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.

Suggested Citation

  • Dong, Fengxia & Hennessy, David A. & Jensen, Helen H., 2010. "Contract and Exit Decisions in Finisher Hog Production," ISU General Staff Papers 201004010700001490, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:201004010700001490
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    References listed on IDEAS

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    1. Väre, Minna & Heshmati, Almas, 2004. "Perspectives on the Early Retirement Decisions of Farming Couples," IZA Discussion Papers 1342, Institute of Labor Economics (IZA).
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    Cited by:

    1. Na Li & Richard J. Vyn & Ken McEwan, 2016. "To Invest or Sell? The Impacts of Ontario’s Greenbelt on Farm Exit and Investment Decisions," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 38(3), pages 389-412.
    2. Thiermann, Insa & Schroeer, Daniel & Latacz-Lohmann, Uwe, 2022. "Are German farmers ready for ‘warm restructuring’ of the pig sector?," 96th Annual Conference, April 4-6, 2022, K U Leuven, Belgium 321201, Agricultural Economics Society - AES.
    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. Key, Nigel D., 2013. "Production Contracts and Farm Business Growth and Survival," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 45(2), pages 1-17, May.
    5. Sarah Ann Wheeler & Ying Xu & Alec Zuo, 2020. "Modelling the climate, water and socio-economic drivers of farmer exit in the Murray-Darling Basin," Climatic Change, Springer, vol. 158(3), pages 551-574, February.
    6. Hennessy, David A. & Zhang, Jing & Bai, Na, 2019. "Animal health inputs, endogenous risk, general infrastructure, technology adoption and industrialized animal agriculture," Food Policy, Elsevier, vol. 83(C), pages 355-362.
    7. Shang, Max Zongyuan & McEwan, Ken, 2017. "The Boundary of the Farm: Homegrown versus Purchased Feed on Ontario Swine Farms," Annual Meeting, 2017, June 18-21, Montreal, Canada 264191, Canadian Agricultural Economics Society.
    8. 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.
    9. Thiermann, Insa & Schröer, Daniel & Latacz-Lohmann, Uwe, 2023. "Are German farmers ready for a ‘warm restructuring’ of the pig sector?," Ecological Economics, Elsevier, vol. 209(C).
    10. Roman Neyter & Oleg Nivievskyi, 2023. "Effect of subsidies on farms' exit decision," Agribusiness, John Wiley & Sons, Ltd., vol. 39(4), pages 941-959, October.
    11. Viira, Ants-Hannes & Pöder, Anne & Värnik, Rando, 2014. "Discrepancies between the Intentions and Behaviour of Farm Operators in the Contexts of Farm Growth, Decline, Continuation and Exit – Evidence from Estonia," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 63(1).
    12. Viira, Ants-Hannes & Pöder, Anne & Värnik, Rando, 2014. "Discrepancies between the Intentions and Behaviour of Farm Operators in the Contexts of Farm Growth, Decline, Continuation and Exit – Evidence from Estonia," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 63(01), pages 1-17, March.
    13. Emmanuel Paroissien & Laure Latruffe & Laurent Piet, 2021. "Early exit from business, performance and neighbours’ influence: a study of farmers in France [Effects of differing farm policies on farm structure and dynamics]," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 48(5), pages 1132-1161.
    14. Fengxia Dong, 2022. "Cover Crops, Drought, Yield, and Risk: An Analysis of US Soybean Production," NBER Chapters, in: American Agriculture, Water Resources, and Climate Change, pages 241-267, National Bureau of Economic Research, Inc.
    15. Alec Zuo & Sarah Ann Wheeler & Peter Boxall & W. L. (Vic) Adamowicz & Darla Hatton MacDonald, 2015. "Identifying Water Prices at which Australian Farmers Will Exit Irrigation: Results of a Stated Preference Survey," The Economic Record, The Economic Society of Australia, vol. 91(S1), pages 109-123, June.
    16. 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, Boston, Massachusetts 235778, Agricultural and Applied Economics Association.

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    More about this item

    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

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