Those that have contracts in hand like raising hogs on contract, those on the outside looking in, don't like contracts. That's one of the findings from the 2004 Pork Industry Structure Study, conducted by Pork magazine, University of Missouri and Iowa State University agricultural economists.
"That's been the result everytime we asked that question," notes Glenn Grimes, University of Missouri agricultural economist, and one of the study's lead researchers. The 2004 study, marks the 17th year that Pork has been surveying producers about production and marketing practices.
Pork production contracts continue to be popular with growers, but also with producer owners (also known as contractors) who need more resources like land and facilities on which to raise hogs. Most growers in the survey believe they have been treated fairly under their contract arrangement and plan to renew the current contract when it expires. Growers also tend to stick with the same producer providing the contract versus switching alliances.
As for market contracts, Grimes and his colleague, Ron Plain, point out a couple surprises that they found from the study. One being the number of hogs sold on a formula type contract tied to pork-product (or meat) prices. Based on this study, about 5.5 million hogs were priced on this type of contract in 2003.
Market contracts tied to the lean-hog-futures prices also were used on about 6.3 million hogs last year.
Several hogs were sold using a contract tied to the feed price and or a window type contract with a ledger. That number equaled about 4.4 million head. Nearly 11 million head of hogs in 2003 were priced on a formula type contract tied to feed and or window with no ledger. The complete report on the 2004 Pork Industry Structure Study can be found at the Pork magazine Web site at (LINK DIRECTLY TO THE REPORT) or to Grimes' and Plain's Web site at http://agebb.missouri.edu/mkt/index.htm
You can find more detailed information, charts and articles relating to the Pork Industry Structure Study in the June, July and August issues of Pork magazine and within a special section at www.porkmag.com