Since we have no studies which tell us this, I leave the question to you: Is contract production of swine a low variance production method? Which is to say, given the emerging strategies to control variation in production, will contract production systems be successful in implementing them?
It is typical now for contract producers to be paid by the pig space instead of on performance. This trend began a little over 10 years ago and was largely brought about for a couple of important reasons. The typical payment schemes prior to this had paid on lbs of gain and occasionally a death loss premium and a sort loss bonus (where the grower was actually selecting the animals for harvest). Some contracts also had a feed efficiency bonus which tried to give the grower a good incentive to adjust feeders.
Most of those things (except perhaps for sort loss bonuses) while partially in the control of the grower, were also heavily influenced by the quality of pigs received and their disease status. The movement to pig space payments, while removing the co-variance of potential for payments has largely removed the incentive for growers to perform in an excellent fashion since an average or below average performance of duties reaps the same reward as an outstanding effort.
As demands increase on growers to manager buildings in such a way to reduce variance of output, which include better management of the environment in the building, careful husbandry and individual animal observation and treatment in a timely fashion, for instance, will performance upgrades be realistically achieved. In addition, animal welfare demands and likely coming audits of such will demand that growers actually perform the activities that they are often already contracted to do, but the stakes will be higher for the owner of the animals.
If the demand for contract buildings is largely now a function of demand for the very valuable manure output to offset skyrocketing commercial fertilizer costs, is there a growing mismatch in the demand for increased animal care and husbandry and the motivation of contract growers? This is not meant to be a dump on contract growers, many many of whom do an outstanding job, but it is leading many companies to unique and changing business structures which involve gaining access to land and facilities but providing their own management and labor.
