Production Contracts in the Hog Industry: Risk, Return and Financing Implications

Abstract

Research results indicate that growers wishing to enter the hog finishing sector, or expand an existing operation, will be able to do so with relatively less equity than would be possible without a production contract. Alternatively, capital constrained growers can invest in relatively larger facilities with a production contract than as a non-contract grower. Risk averse growers are able to finish hogs under contract profitably with less risk than is possible without a contract.