For example, recent analysis suggests that resource-providing contracts in the poultry industry relieve the grower of significant price risk. Farmers themselves can be contractors. One farmer will often contract with another farmer to complete a stage of production, particularly in the raising of livestock and nursery-related products. Contracts between farmers are legally binding, just as they are between a farmer and a processor. 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. Potential contractors include investors, feed companies and farmers. The two major risks involved in hog production are the need to invest in specialized facilities and fluctuating returns. Both contract and independent hog producers face the risks associated with investing in specialized facilities. Quite often hog buildings will bring less on the market than they are worth to the seller.