The share of livestock production under contract varies

The share of livestock production under contract varies

For farmers, contracts offer two main advantages. First, farmers can use marketing or production contracts to ensure outlets for their commodities, especially in thin markets or in markets for perishable products. Second, contracts can reduce production and price risks. Although the share of aggregate farm production under contract has stabilized at around 40 percent, the aggregate data mask large changes for specific commodities or commodity groups. In particular, the share of livestock production under contract grew from 33 percent in 1991-93 to 50 percent in 2006-07, led by hogs and cattle under production contracts. Production under contract was more stable for dairy production (mostly marketing contracts) and poultry and egg production (generally production contracts). This chart is found in the ERS report, The Changing Organization of U.S. Farming, EIB-88, December 2011.


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