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Production Contracts, Risk Shifting, and Relative Performance Payments in the Pork Industry

Published online by Cambridge University Press:  28 April 2015

Laura L. Martin
Laura L. Martin*
Affiliation:
Department of Agricultural Economics, Michigan State University
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Abstract

Actual performance records of production contract farmers are used to assess the extent to which contract production reduces the risk borne by pork producers. Comparisons of contracting relative to independent market production reveal that farmers who enter into production contracts based on absolute performance measures reduce risks associated with variable income. Weak evidence is found that relative performance contracts, similar to those used in the broiler chicken industry, further reduce income variability. The effectiveness of such relative performance contracts will rely on several factors; among these are increased contract production and a more uniform pork production and processing system.

Keywords

absolute performance paymentincome variabilitypork industryproduction contractsrelative performance paymentrisk shifting
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 29 , Issue 2 , December 1997 , pp. 267 - 278
Copyright
Copyright © Southern Agricultural Economics Association 1998

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