A Markov chain analysis of the size of hog production firms in the United States

The U.S. hog industry expanded rapidly during the 1980s and 1990s. Along with this expansion, hog farms have become larger, partly due to economies of size and new business arrangements. Using markov chain analysis, this study analyzes the movement of hog farms among three different size categories. Results indicate that the hog–corn price ratio has continued to affect the entry and exit of small hog farms, and has influenced the movement of hog farms among size categories. Interest rates, processing capacity, and agglomeration economies have impacted new entry of hog farms in the Unites States [L110, L230].