After the escrow is paid, the producer receives full market price for hogs sold. Additional Long-Term Contract Terms and Concerns May require carcass merit pricing. May require a minimum liveweight or carcass grade to qualify for the contract. Repeated delivery of sub-standard hogs may be grounds for cancelling contract. Scheduled deliveries are required.
Some contracts allow producer to commit a portion of production.
Contracts may require producer to commit all production and buyer has first rights on any expansion. Contract may require that genetic sources, nutritional practices, facilities and production practices be approved by buyer. Contract may have a clause that keeps track of price gains and losses under risk-sharing provisions and it may be continued or bought out if either party has made a net gain. This assures the same long-range average price as the cash market, without highs and lows. A producers interest in hog contracts should be quality driven, not quantity driven.