Pork Packer Procurement and Merchandising Practices, 2000
Hog procurement practices are expected to continue to evolve toward tighter coordination systems to satisfy pork retailers and final consumers for consistently high-quality, safe pork products. More demanding consumers are encouraging more branded retail and food service products that entail both brand loyalty and product liability. Packers report success in acquiring leaner, higher yielding hogs through coordinated systems than are generally available through traditional cash market channels. Packers report that hogs they produce themselves address the concerns of quality, consistency, and safety as well or better than market contract hogs produced by others. Although capturing the profits in the production sector, packers admit that their own hogs are not lower cost than hogs from producers. It appears that the increased quality control afforded the integrated packer is sufficient to offset possible higher costs of producing their own hogs.
From the other end of the pork chain, producers are asking for marketing agreements to secure financing to continue in hog production or to expand, and for purchasing programs that reward leaner, higher yielding hogs. Many producers are reluctant to adopt new technologies and invest in new facilities and genetics without a formal arrangement to market output. In an increasingly risky agricultural market place, long-term marketing agreements are a private sector response to a particular widespread problem—producing without a place to sell.