It can be argued that the market signals have not worked particularly well during the past three years. Many policy makers, interest group leaders and marketing experts were calling for policies to expand hog numbers at the same time the industry was shutting down four processing plants and importing more Canadian hogs. As a result, supply overran slaughter capacity. Only a few analysts dared to buck the politically correct propaganda of the time and their message was ignored or attacked when it could not be ignored. Enough about spilled milk.
Experts see nothing on the horizon to slow the trend toward more contracting.
More contracting may in fact improve coordination and reduce the odds for another slaughter capacity crisis. The only question is whether all producers will have access to similar contracts terms. Edelman is a professor of economics and an extension public policy specialist at Iowa State University.