That the vertical coordination of the hog industry has been developing and has extended production rapidly in new production areas such as North Carolina in recent years is well established. A question however, is whether or not such structural change has developed in a more traditional area, for example, Iowa State. If such vertical coordination as initiated by large-scale firms has developed even in such traditional areas as the corn-belt, which includes Iowa, such development can be considered "a turning point" for the hog industry in the United States. Recently the share of the large-scale operations to the total number of marketed hogs has been increasing and most of the increase has come from contract production with growers, even in Iowa. In addition, Smithfield Foods, which is one of the major packers, acquired Murphy Family Farms, the acquisition of which provides for the involvement of Smithfield Foods in the production section making vertical coordination possible. The coordination seen in Iowa state is not limited solely to Iowa, but includes neighboring states as well. In this process, Iowa state plays the roles of a "finishing" and "slaughtering" center. In this sense, vertical coordination is developing even in Iowa. Therefore it is very interesting to find a reason why the contract coordination can be expanded. The structure of the contract in Iowa does not emphasize the producer's incentive and the instruction of contractors in the finishing processis reflected clearly in the contract. But presently, crop production is generally more important as financial sources than hog production in Iowa and hog producers tend to choose contracts in order to avoid risks rather than increase the income from the hog production. Therefore, it is presumed that even those producers who do not want to do so can accept the terms of contract production.
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