NC agriculture

What is Contract Farming?

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In the world of agriculture, you often hear terms like “contract farming” and “integrators,” but many people don’t have a good understanding about what these words mean or how these farms operate.

 In North Carolina, most farms are operated by family farmers. Many of these families have been growing crops and raising livestock for generations.

 Beginning in the late 1980s and early 1990s, the concept of “contract farming” began to gain popularity. This is a system where family farmers sign an agreement to raise animals — typically pigs, chickens and turkeys — for companies such as Smithfield, Prestage Farms, or Butterball. These are typically larger companies, known as “integrators.” The name stems from the fact that the entire process of raising animals and selling the final product is integrated and controlled by the company that owns the animals.

For larger companies that sell nationally to large supermarket or retail chains, they have to provide a product that is consistent and uniform. It’s hard to do that if each farmer is feeding their animals different diets or using different breeds of pigs. So these companies are integrated in that they own the pigs and control the genetics, diet, and veterinary care to ensure that the final product is a consistent one for customers.

 How Contract Farming Works

Although the integrator owns and controls the big aspects of production, it’s the contract farmers who make the process work. In the simplest terms, integrators provide the animals and the resources they need, while farmers are entrusted to raise the pigs, chickens, and turkeys in a safe and responsible way until they are ready to go to the processing plants.  

The family farmers provide the land, the barns, and the labor needed to properly care for the animals. The integrators provide feed, access to veterinary care, and guidance on how to raise animals most efficiently. 

Contract farming is a team effort, with both sides operating under more predictable conditions while sharing the benefits and risks associated with livestock production.

 Why Choose Contract Farming?

Many family farmers choose the contract farming model because it provides a predictable income regardless of changing market conditions. The farmers are free to focus on what they do best — raising healthy animals in a safe and responsible way — without worrying about the buying feed, accessing veterinary care, or issues unrelated to raising the animals.

When market conditions are volatile — like when corn prices are high and market prices are low — it can be a stressful time for independent farmers. Contract growers don’t have to worry about those type of market fluctuations. They raise the animals, and the integrator takes it from it there.

Integrators benefit from greater predictability, too. They take comfort in knowing that their animals are being raised in a similar environment, consistently receiving the same feed and benefiting from expert veterinary care.

While integrators may have preferences in how animals are raised, family farmers still enjoy flexibility in how they operate their farm. The farmer has the ultimate responsibility for managing the farm and raising the animals.

The contract farming model has worked well in North Carolina for decades, but it is not without risk. Challenging market conditions have forced some integrators to reduce their operations or cancel contracts. That can create challenges for farmers who have grown accustomed to a predictable cycle of raising animals.

Contract farming has led to great strides in how we raise livestock through the years. While we don’t know exactly how this system will continue to evolve, North Carolina’s farm families are resilient. Our love for the land and our commitment to the animals we raise remain the foundation on which North Carolina’s agriculture industry stands.