The U.S. markets for pigs include a mix of spot markets, contracts, and processor ownership. For example, USDA (2002a) indicates that 14.1 percent of market hog sales on October 21, 2002, were spot market transactions (where prices are negotiated within 24 hours of the delivery of pigs to market); another 67.4 percent were conducted through marketing contracts. The remaining 18.5 percent of hogs slaughtered that day were packer owned. USDA also estimates that 33 percent of the U.S. pig inventory on December 1, 2001, was under production contract to operations that owned at least 5000 pigs (USDA, 2001). Many of the entities that own pigs and contract them out under production contracts are pig producers and not pork processors. Some pork processors own pig farms, and some own pigs and contract them out to farmers under production contracts. Some Midwestern states including Iowa prohibit packer ownership of pigs prior to slaughter.

Poultry. Almost all broilers (young chickens raised for meat) and turkeys are raised in buildings, as are egg-laying chickens. Martinez (2002) indicates that more than 80 percent of broilers are raised under production contracts and the remainder are raised on farms owned by the processors. He also reports that 56 percent of turkeys are raised under production contracts and another 32 percent are owned and raised by turkey processors. Martinez (2002) indicates that 60 percent of chicken eggs are produced on farms owned by the processor and another 38 percent are produced under production contracts for the processor.

Although not substantially concentrated economically in terms of being able to affect prices for their output, the animal feeding operations (as distinguished from the large processing firms, referred to as “integrators” in the case of swine and poultry) are regionally concentrated (Box 2-1). The cumulative shares of production based on number of animals for the top four and next four states are shown in Table 2-2.

As improvements have been made in poultry housing, and equipment for feeding, watering, and ventilation, the number of birds that an individual farmer could care for has increased. A flock of 1000-2000 birds was considered huge in the 1920s. Presently, one broiler farmer can easily manage and care for 150,000 or more birds. Complexes housing laying hens for the production table eggs may have 1.5 million birds that are typically managed by a crew of approximately 15. Again, economics have caused poultry farmers to look for more efficient and effective methods of producing more animals per unit of labor.

State and regional specialization, as shown in Table 2-2, is the result of various factors that affect the livestock industry. The cost of animal feed, the importance of which is evident in the frequent high rankings of states in the Midwest, is obviously significant. Transportation costs—both for getting feedstuffs to the feeding operations and for getting products to markets—are also important, although their importance tends to be reduced by practices such as shipping feed grains in unitized trains, which can significantly lower transportation costs for