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Production Contracts and Farm Business Growth and Survival

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  • Key, Nigel D.

Abstract

Using farm-level panel data from the U.S. Census of Agriculture, this research examines whether hog producers with production contracts increased output more, or were more likely to survive in business over 5 years, compared with independent producers. Additionally, this research examines whether independent producers who adopted a production contract grew more than similar independent operations who did not contract. The local availability of contracts serves as an instrumental variable to address the potential endogeneity of the contracting decision. Results indicate that the use and adoption of production contracts affect farm size growth and survival differently depending on the initial size of an operation.

Suggested Citation

  • 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.
    • Handle: RePEc:ags:joaaec:149144
    DOI: 10.22004/ag.econ.149144
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    1. Joshua D. Angrist & Alan B. Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 69-85, Fall.
    2. Key, Nigel & McBride, William & Mosheim, Roberto, 2008. "Decomposition of Total Factor Productivity Change in the U.S. Hog Industry," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 40(1), pages 137-149, April.
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    8. Tomislav Vukina & Porametr Leegomonchai, 2006. "Oligopsony Power, Asset Specificity, and Hold-Up: Evidence from the Broiler Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(3), pages 589-605.
    9. Joshua Angrist & Alan Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Working Papers 834, Princeton University, Department of Economics, Industrial Relations Section..
    10. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-529, October.
    11. Daniel A. Sumner & James D. Leiby, 1987. "An Econometric Analysis of the Effects of Human Capital on Size and Growth among Dairy Farms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(2), pages 465-470.
    12. Martin, Laura L., 1997. "Production Contracts, Risk Shifting, And Relative Performance Payments In The Pork Industry," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 29(2), pages 1-12, December.
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    Cited by:

    1. Davis, Christopher & Dimitri, Carolyn & Nehring, Richard & Collins, LaPorchia & Haley, Mildred & Ha, Kim & Gillespie, Jeffrey, 2022. "U.S. Hog Production: Rising Output and Changing Trends in Productivity Growth," Amber Waves:The Economics of Food, Farming, Natural Resources, and Rural America, United States Department of Agriculture, Economic Research Service, vol. 2022(Economic ), August.
    2. Muñoz, Mª Pilar & Márquez, María Dolores & Sánchez, Josep A., 2011. "Contagion between United States and european markets during the recent crises," MPRA Paper 35993, University Library of Munich, Germany.
    3. MacDonald, James M. & Korb, Penelope J., 2011. "Agricultural Contracting Update: Contracts in 2008," Economic Information Bulletin 101279, United States Department of Agriculture, Economic Research Service.
    4. Li, X. & Guo, H. & Li, L., 2018. "Do Product Attributes affect Farmer's Contract Farming Participation? Evidence from Vegetable Production in China," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277154, International Association of Agricultural Economists.
    5. Saroj & Kirtti Ranjan Paltasingh, 2024. "What promotes production contract in Indian agriculture? Managing market risk versus profit orientation," Agricultural Economics, International Association of Agricultural Economists, vol. 55(1), pages 140-153, January.
    6. Mao, Hui & Zhou, Li & Ifft, Jennifer & Ying, RuiYao, 2019. "Risk preferences, production contracts and technology adoption by broiler farmers in China," China Economic Review, Elsevier, vol. 54(C), pages 147-159.
    7. Martins, Franco Müller & Trienekens, Jacques & Omta, Onno, 2021. "Impact of buyers' support on farmer performance and investments in the Brazilian pork supply chain," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 25(1), July.
    8. Mao, Hui & Zhou, Li & Ifft, Jennifer, 2017. "Risk Preferences, Contracts and Technology Adoption by Broiler Farmers in China," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 257248, Agricultural and Applied Economics Association.
    9. Li, Xiaokang & Guo, Hongdong & Li, Lin, 2016. "Contract Farming in China: Perspectives of Smallholders in Vegetable Production," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235573, Agricultural and Applied Economics Association.
    10. Anh Tru Nguyen & Janet Dzator & Andrew Nadolny, 2018. "Contract farming, agriculture productivity and poverty reduction: evidence from tea estates in Viet Nam," Asia-Pacific Sustainable Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 25(1), pages 109-145, June.
    11. McBride, William D. & Key, Nigel, 2013. "U.S. Hog Production From 1992 to 2009: Technology, Restructuring, and Productivity Growth," Economic Research Report 262217, United States Department of Agriculture, Economic Research Service.

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    More about this item

    Keywords

    Farm Management; Livestock Production/Industries; Marketing;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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