Determining the Use of Contract in Brazilian Feedlot: an Empirical Analysis
Abstract: The cattle beef activity appears in almost 75% Brazilian farms, becoming one of the main activities in rural areas, according to IBGE (2012). The production runs, on average, for 3 years (finishing cow-calf), and for this reason, it is essential to agricultural enterprises the standpoint of property. Feedlot arises as a great alternative to intensify production. Investments in feedlot depend on the intensive capital and involve greater risks of production. By the side of the industry with the expansion of the consumer market is need to provide quality meat, standardized and continuously, making this sector seek partnerships and contracts with cattle`s suppliers. Because of these risks and the uncertainty of the trade, the use of contracts between producers and beef industry has been growing in the last years. 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 the states of Goiás, Mato Grosso and Sao Paulo in Brazil. It was used the Tobit model to determine the main factors determining the use of contracts. The choice of the model mentioned occurs because the dependent variable (contract) take many values equal to zero. And this type of data leads to a corner solution very common in economics. Therefore the choice of the above model (Wooldridge, 2009). The results show that the variables cattle, machines, and prizes were statistically significant at 1%, and that the hypotheses H0, H1, and H3 can’t be rejected. That is when the greatest level of technology adopted, as well as the increased risk of production and cattle size, there is a quest for realization of contract between Feedlot cattle and beef industry. Already the hypotheses H2, H4 and H5 were rejected. The distance, the market price and the cost don’t interfere in the use of contracts in Brazilian case.
