• ISSN: 2155-7950
  • Journal of Business and Economics

Determining the Use of Contract in Brazilian Feedlot:

An Empirical Analysis

Thiago Bernardino De Carvalho, Éder De Carvalho Januário, Maria Sylvia Macchione Saes
(University of São Paulo–FEA/USP, Sao Paulo, Brazil)
Abstract: The cattle activity appears in almost 75% Brazilian farms. The production runs, on average, for 3 years (finishing cow-calf), based on pasture (extensive system). Feedlot arises as an alternative to intensify production. Investments in feedlot depend on the intensive capital and involve greater risks of production and market. By the side of the industry is need to provide quality meat, standardized and continuously, making this sector seek partnerships and contracts suppliers. Because of these risks and the uncertainty of the trade, the use of contracts between producers and industry has been growing in the last years. Regarding the uncertainty of the agents, according to the New Institutional Economics, is not possible to predict all the events surrounding the transactions; this way, the contracts are incomplete. This article aims to analyze the determinants of contract between producers and slaughterhouses in Brazil. The data used to make this analysis were 669 questionnaires with Feedlots in some states in Brazil. It was used a model to determine the main factors determining the use of contracts. The results show that the variables cattle, machines, and prizes were statistically significant at 1%, and prize as the main variable determining of contract between feedlots and industry.
Key words: contract; cattle; feedlot
JEL codes: L14, Q11, Q13


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