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United States Department of Agriculture

A report summary from the Economic Research Service October 2013

Find the full report 

at www.ers.usda.

gov/publications/eibeconomic-researchreport/err158

What Is the Issue?

Over the past two decades, hog producers have adjusted the size, organizational structure, and 

technological base of their operations; some have ceased hog production. The effects of these 

changes have extended beyond the industry as restructuring may have heightened environmental 

risks and nuisance impacts and lowered prices for pork consumers. In addition, the economic 

environment for pork producers changed as new uses for corn, the primary ingredient of hog feed, 

have increased feed prices. A slowdown in productivity growth after 2004 suggests that the era of 

dramatic growth in hog production is likely over, absent new technological innovation. This report 

presents information about changing structural characteristics and economic relationships in hog 

production, and discusses what these suggest for the future of hog farms.

What Did the Study Find?

The number of hog farms fell by more than 70 percent from 1992 to 2009 while the hog inventory remained stable. The average hog farm grew from 945 head of hogs sold or removed under 

contract in 1992 to 8,389 head in 2009. Specialized fi nishing operations (feeder-to-fi nish) increased 

their share of production from 22 to 77 percent during 1992-2004, while the share of production 

from farrow-to-fi nish operations fell from 65 to 18 percent. However, from 2004 to 2009 the 

shift toward operations specializing in a single phase of production slowed, and farrow-to-fi nish 

producers slightly increased their production share over this period. High corn and soybean prices 

during 2007-09 raised hog feed costs considerably. Declining hog farm numbers during this period 

suggest that many small, likely high-cost operations ceased production, adding to the average size 

of hog operations. 

Hog operations organized under production contracts grew from 5 percent of production in 1992 

to 67 percent in 2004. Operations producing under contract were larger than other operations and 

more likely to specialize in a single production phase. Between 2004 and 2009, the share of hogs 

produced under contract grew only 4 percentage points, to 71 percent. Few farrow-to-fi nish farms 

produce under contract. An expanded share of production from large-scale farrow-to-fi nish operations likely slowed growth in the use of production contracts on hog farms after 2004.

The rapid growth of hog operations along the southeast coast of the United States during 1992-98 

slowed in subsequent years partly because the North Carolina State legislature placed a moratorium on expanded hog production in the State (the leading hog producer in this area) in response 

to environmental concerns. In contrast, the size of hog operations increased more rapidly in the 

U.S. Hog Production From 1992 to 2009:

Technology, Restructuring, and 

Productivity Growth

William D. McBride and Nigel Key

Economic

Research

Service

Economic 

Research 

Report 

Number 158

October 2013

United States Department of Agriculture

William D. McBride and Nigel Key

U.S. Hog Production From 1992 to 

2009: Technology, Restructuring, 

and Productivity Growth
www.ers.usda.gov

Heartland (mainly Iowa and Illinois) during 1998-2004 as contract production in this area expanded. This trend 

continued during 2004-09 as average production from both farrow-to-fi nish and feeder-to-fi nish hog operations 

increased in the Heartland.

Substantial productivity gains for hog farms since 1992 were attributable to increases in the scale of production and 

technological innovation. The increased size of operations accounted for almost half of the total increase in hog 

farm productivity since 1992. However, individual and total factor productivity growth on feeder-to-fi nish farms, 

where most market hogs are produced, slowed considerably between 2004 and 2009. 

Productivity gains in hog production during 1992-2009 have likely benefi ted U.S. consumers in terms of lower pork 

prices, and enhanced the competitive position of U.S. producers in international markets. However, increases in the 

scale of production have resulted in greater animal density, creating possible environmental risks. On the other hand, 

increased feed effi ciency accompanying structural change offset some of these risks as the waste per animal fell. In 

addition, concentrating manure sources in fewer locations potentially affects fewer people and may also make some 

manure treatment technologies (e.g., energy from bio-waste, or processing into concentrated fertilizer) feasible.

The era of dramatic productivity growth in hog production from 1992 to 2009 will likely remain unmatched, absent 

signifi cant technological innovation. The 1992-2009 data support this conclusion on two fronts. First, the gains 

from exploiting scale economies are nearly exhausted, as most hog production now takes place at a size where 

returns to scale are nearly constant. Second, the measurable technological and organizational innovations contributing to productivity growth (e.g., confi nement housing, production contracts, artifi cial insemination, all-in/all-out 

management) are now widely diffused. 

How Was the Study Conducted?

Data used in this report come from USDA surveys of U.S. hog producers conducted for 1992, 1998, 2004, and 2009. 

Summaries of each data year were used to describe hog farm differences by producer type according to size, business organization, region, and production technology. A regression analysis was used to measure hog farm total 

factor productivity growth between 1992 and 2009 and decompose it into changes in four components: (1) technical 

change, the increase in the maximum output produced from a given level of inputs; (2) technical effi ciency, the 

farm’s ability to achieve maximum output given its set of inputs; (3) scale effi ciency, the degree to which a farm 

optimizes the scale of its operations; and (4) allocative effi ciency, a farmer’s ability to choose a less costly mix of 

inputs to produce the same level of output. This study focused particularly on economies of scale, analyzing how 

increases in scale have contributed to productivity growth, and investigating whether scale economies in hog production have increased over time.