Pork quality and the role of marketing contracts: a case study of the US pork industry

Abstract

PurposeThis paper aims to provide an assessment of the growth in marketing contracts in the US pork industry as an efficient means to control pork quality and reduce transaction costs.Design/methodology/approachInformation collected from pork quality and safety summits sponsored by the National Pork Producers Council in cooperation with the National Pork Board, published surveys of large packers related to contract use, and 15 contracts submitted by producers to the Iowa Attorney General's Office from 1996 to 2001 were examined. The theoretical framework used combines branches of the industrial organization literature.FindingsThe paper provides information documenting the growing importance of addressing pork quality problems in the 1990s and how marketing contracts between packers and producers can help address these problems. Recognizes their role in reducing transaction costs associated with carcass pricing programs, reducing pork quality measuring costs, providing quality control, and reducing costs of adapting to quality uncertainty.Research limitations/implicationsThe list of contracts examined is a small collection of contracts voluntarily submitted by producers, and pertains to a specific geographic section of the USA. Thus, they may not be representative of the entire industry.Practical implicationsThe paper provides background information on quality issues faced by the US pork industry and a framework for better understanding the potential role of marketing contracts in addressing these issues.Originality/valueThis paper provides rather unique institutional background information on important changes occurring in the US pork industry in the 1990s and the role of the growth in marketing contracts in addressing related pork quality issues over time. Given the proprietary nature of specific contract terms, a small sample of long‐term marketing contracts is analyzed to better understand contract design.