Although there are still questions surrounding contract production and vertical integration, USDA’s Economic Research Service found that both lead to lower production and slaughter costs, lower consumer prices and improved product quality. The study compares vertical integration in the pork and broiler industries.

“Production contracts between growers and integrators reduce capital constraints and improve production practices,” the study says. “These contracts facilitate the rapid and thorough adoption of cost-reducing technology.”

The study also concludes that increased control over production through contract arrangements “results in the uniform, high-quality broilers and pork necessary for further processing, branding and large-scale specification buying by restaurants and supermarket chains.” By increasing animal quality, contracting and integration can cut costs of measuring and sorting broilers and hogs at marketing.

If the pork industry continues to follow the trend set by the broiler industry, the study projects that lower production and slaughter costs, lower consumer prices and improved product quality will result.

You can check out the entire study at: www.econ.ag.gov/epubs.

www.econ.ag.gov/epubs