Is more vertical integration the future of food supply chains? Empirical evidence and theoretical considerations from German pork production

In the literature it is often hypothesized that contracts and vertical integration are paramount for the future competitiveness of meat supply chains. In this paper we review the empirical evidence and theoretical considerations underlying this argumentation. We confront the contract and integration hypothesis with transaction cost considerations taking into account current developments at the slaughterhouse level and in quality assurance systems and results from a recent survey in German pork production. Cluster analysis was performed to classify farmers with different attitudes towards contract farming. It is concluded that improved supplier relationship management may be a viable alternative to more contracts and vertical integration in meat supply chains.