Listed below are three types of Production Contracts. Market-specific production contracts are those that are negotiated between a buyer who operates at one stage of the value chain and a seller who operates at another. For example, a farmer may agree to deliver an agreed upon quantity of animals to a packer on a specific date. For example, a poultry processor retains ownership of the chicks as they are raised by a farmer. The contractor typically bears the costs associated with feed, medication, transportation in and out, feeder pigs for finishing contracts, and breeding stock for feeder pig production contracts.
Growers typically raise the pigs in their own facilities, and are compensated on a fee basis.
Growers costs typically include facility costs, repairs, utilities, insurance, and property taxes. The two major risks involved in hog production are the risks associated with investing in specialized facilities and the risks associated with fluctuating returns. Investment risk is the largest risk that contract hog producers face. Contract payments can be on a per head basis, a per pound of gain basis, a per day basis, or a per square foot of pig space basis. Contracting in the Boiler Industry Specific terms of broiler contracts vary from company to company, with most contracts specifying the provision of inputs and the compensation to farmers.