Analysis of Pork Production Contracts

Pork production occurs under numerous forms of organizational structures ranging from sole proprietorship, where one individual provides the necessary capital and bears all risks, to those where multiple individuals and/or entities pool resources such as labor, capital, and management and risk sharing. One organizational method which has received an increased focus is contracting. Contract production is an arrangement which blends the various production resources and parties and spells out the division of responsibilities for supplying those resources (i.e., capital, labor, management). To effectively evaluate contract production arrangements it is necessary to compare the responsibilities and resources provided by each party \\ith the respective expected return

A Comparison of Iowa Swine Production with Its Competition

There has been much discussion recently about changes occurring in the swine industry. The purpose of this study is to assess the competitive position of Iowa pork producers. A comparison of swine production efficiencies between Iowa producers and the competition is presented. In this report the competition is the highly intensified swine production systems

A Comparison of High and Low Profit Swine Producers in Iowa

This report looks at a comparison of swine production efficiency between the low and high profit producers in the Iowa Swine Enterprise Records Program for the year 1981 through 1986. The Swine Enterprise Record Program is coordinated by Emmett Stevermer through the Iowa State University Cooperative Ex tension service. It is a record keeping program with which cooperating hog producers,keep detailed records on their hog enterprises. The data provides information on average results for producers. It also provides a breakdown of how the top one-third as well as the low one-third producers performed. Producers were categorized by level of margin between pork production costs and returns

A theoretical and financial analysis of pork production contracts

A theoretical model of pork production contracts using the principal-agent framework is used to investigate optimal compensation schedules for both feeders and owners. The optimal compensation schedules derived may take on a variety of forms, but all payment schedules should contain an inverse relationship between the quality and quantity of inputs provided by the owner and the compensation provided to the feeder;A simulation analysis is used to investigate the risk and returns to both the feeder and the owner for feeder pig finishing and feeder pig production contracts. For the owner the returns from a contract are similar (though somewhat smaller) to that of a sole proprietor, and the owner is able to reduce risk. The contract feeder's risk and returns are substantially reduced as compared to a sole proprietor. For both the feeder and the owner some contracts are found to dominate other contracts (as measured by stochastic dominance). Pork production contracts may or may not be equitable arrangements for a feeder, depending upon the specific compensation schedule, the investment in facilities required, and the actions of the owner. Owners, like sole proprietors, are subject to wide variations in returns due to their acceptance of price risk and some production risk, but avoid the risk of large investments in facilities through a contractual arrangement with a feeder;Feeders' risks in a contractual arrangement are largely due to biological factors such as feed efficiency and death loss. Thus there exists a large difference in expected returns between feeders with good production efficiency versus feeders with poor production efficiency;Feeders face additional risk if investment in facilities is financed with a term loan that does not match the term or length of the contractual arrangement. The possibility of termination of the contract or an alteration of terms by the owner places additional financial risk upon the feeder and the feeder's lender;Contracts alter the feeder's cost structure in that fixed costs represent a large percentage of total costs. This implies an increase in operating leverage and an increased sensitivity to changes in total revenue as compared to a sole proprietor.</p

Comparing Pork Production Contracts

Contract pork production is receiving increased attention. In a Pork '89'article. Rhodes estimated that "at most, a little less than 10 percent of the hogs in the United States are produced under contract."' This level is now likely 12-14 percent of all hogs.' *A Pork '90 article described the typical contract producer as one about 40 years of age and has produced hogs'for about 12 years. The contractor was generally happy with the contract program and had &iished pigs for the current contractor for over 2 years.</p

Analysis of Pork Production Contracts

Pork production occurs under numerous forms of organizational structures ranging from sole proprietorship, where one individual provides the necessary capital and bears all risks, to those where multiple individuals and/or entities pool resources such as labor, capital, and management and risk sharing. One organizational method which has received an increased focus is contracting. Contract production is an arrangement which blends the various production resources and parties and spells out the division of responsibilities for supplying those resources (i.e., capital, labor, management). To effectively evaluate contract production arrangements it is necessary to compare the responsibilities and resources provided by each party \\ith the respective expected returns</p

A Comparison of High and Low Profit Swine Producers in Iowa

This report looks at a comparison of swine production efficiency between the low and high profit producers in the Iowa Swine Enterprise Records Program for the year 1981 through 1986. The Swine Enterprise Record Program is coordinated by Emmett Stevermer through the Iowa State University Cooperative Ex tension service. It is a record keeping program with which cooperating hog producers,keep detailed records on their hog enterprises. The data provides information on average results for producers. It also provides a breakdown of how the top one-third as well as the low one-third producers performed. Producers were categorized by level of margin between pork production costs and returns.</p

A Comparison of Iowa Swine Production with Its Competition

There has been much discussion recently about changes occurring in the swine industry. The purpose of this study is to assess the competitive position of Iowa pork producers. A comparison of swine production efficiencies between Iowa producers and the competition is presented. In this report the competition is the highly intensified swine production systems.</p