Swine and poultry production have become major commercial activities over the last two decades, propelled by technology and rapid development of the feed sector. Dairy development has been marked by a shift from non-specialized farms where milk was almost a by-product, to specialized and vertically-integrated dairy production. The transition was spurred along by liberalization of pricing in 1991, after decades of cooperative dairy marketing under tight government regulation of the sector. Since the mid-1990s, private processors have enforced the adoption by farmers of on-farm chilling and other technologies that have made continued participation by producers of less than 100 liters per day infeasible. Small dairy farming has traditionally been located in the temperate South in states such as Santa Catarina; in 1996, only 28 percent of farms in the south had more than 70 cows, up from 18 percent in 1985. The growth area has been in the Center-West, in settlement areas of states such as Goias, home to new and large farms (see Figure 2.8 in the appendix to this chapter). In 1996, 81 percent of farms in the Center-West had more than 70 cows, up from 69 percent in 1985 (Camargo Barros et. al., 2003).
Until recently, Brazilian poultry production was primarily located on smaller farms in the South; a typical farmer in Santa Catarina province in the mid 1990s would have 6 to 15,000 broilers. As in the case of dairy, growth has been primarily on much larger and more specialized farms in the Center-West (see Figure 2.9 in the appendix to this chapter). The average poultry farm may in fact have declined further in size over the past 15 years in the South, as land and environmental pressures have come to bear, and as integrators have put pressure on small-scale producers to increase the size of their operations to lower their integrator costs in supplying inputs, technical assistance, and picking up animals for slaughter. Farmers who took out loans to expand their operations found it difficult to weather the devaluation of the Real; and many of those who did scale-up by taking out loans went bankrupt. In the Center-West, however, 28 percent of farms in 1996 had more than 10,000 birds per cycle, up from 42 percent in 1985 (Camargo Barros et. al., 2003). Furthermore, most growth within regions has been on the largest farms.
Similar trends have been observed in the swine industry. The Center-West of Brazil is rapidly evolving one of the lowest cost swine production zones in the world. Production of swine, as in the cases of poultry and dairy are following feed sources to the extensive farming belt of the Center-West (see Figure 2.10 in the appendix to this chapter). Rapid rises in feed costs since 2001 are contributing to the rapid exit of small and medium-scale producers in the South who cannot make the move to the Center-West.
In sum, it is difficult to separate livestock development in Brazil from three major structural changes of the early 1990s: liberalized internal markets in combination with a move towards an outward looking-orientation in agriculture; achievement of disease control objectives for export without vaccination to the OECD countries in part of Brazil; and the phenomenal growth of the feedgrain industry. In the four countries studied, the smallholder is probably least likely to be able to survive in Brazil, at least as an independent producer.
Given the ubiquitous trend observed in the study countries of both growth and concentration of the livestock sector, it is critical to look at an institutional change that has occurred in all four countries that has permitted some smallholder farms to make a smoother transition. This is contract farming.
 This section draws on
Camargo Barros et.al., 2003, which gives appropriate citations for