Since being passed by California voters in 2018, Proposition 12, a farm animal welfare law, has faced a series of legal challenges that have led to uncertainty and delays in the implementation and enforcement of its requirements for the treatment of breeding pigs.
A new Special Issue of ARE Update sheds light on its contentious path to eventual full implementation on Jan. 1, 2024, and analyzes how these delays have affected the retail and wholesale pork market.
Preliminary data suggest that Prop 12, and the uncertainty surrounding it, have led to an average retail price increase of 20% for covered pork products (i.e., those included under the regulation, mainly uncooked cuts of pork), as well as significantly higher prices for wholesale pork products during the implementation period and as hog farms nationally continue to adjust to the law.
Prop 12, officially known as the “Prevention of Cruelty to Farm Animals Act,” was approved by 63% of California voters. The law requires housing standards for egg-laying hens, veal calves and breeding pigs for the eggs or meat of these animals or their offspring to be sold in California.
While these standards first went into effect for egg-laying hens and veal calves as early as Jan. 1, 2020, many farms and businesses were hesitant to make large investments in the sow housing and traceability requirements until legal issues were settled for Prop 12-compliant pork.
Supreme Court ruling
On May 11, 2023, the U.S. Supreme Court upheld Prop 12. As a result, and consistent with rulings of the Sacramento Superior Court, California began requiring Prop 12-compliant pork on July 1, 2023, while allowing remaining non-compliant pork already in the supply chain to be sold until Jan. 1, 2024.
Although full enforcement began almost eight months after the Supreme Court ruling, hog farms, almost all of which are outside California, continue to expand the supply of pork from hogs born of mother pigs that meet California housing and treatment standards.
“A long complicated process is not uncommon for major regulations,” said Daniel A. Sumner, a study co-author and distinguished professor in the UC Davis Department of Agricultural and Resource Economics.
Economists Hannah Hawkins, Shawn Arita and Seth Meyer with the U.S. Department of Agriculture's Office of the Chief Economist have been documenting prices and quantities of hogs and pork as the industry has adjusted to Prop 12.
Using Circana retail scanner data, they found that in the past nine months covered pork products sold in California increased in price compared to the rest of the United States.
While there was significant price fluctuation between the partial and full implementation dates, the initial price impacts were higher than would be expected after full adjustment, with price increases of 16% for bacon and 41% for pork loin.
Based on USDA Agricultural Marketing Service data, the authors found that wholesale prices for compliant pork cuts also increased substantially during the adjustment period, with an average price premium of 22%.
Industry catching up
Due to the many delays in implementation, Prop 12-compliant pork volumes are not yet sufficient to meet quantities that would have been demanded without these significant price increases.
As the industry catches up to supply sufficient quantities of compliant pork meat to meet the California demand and a new market equilibrium is reached, both retail and wholesale prices may settle at lower price premiums. However, we may still be several months away from understanding the full impact of Prop 12 on meat and egg producers and consumers.
To learn more about the implementation of Prop 12 and its impact on the retail and wholesale pork market, read the full Special Issue of ARE Update 27(3), UC Giannini Foundation of Agricultural Economics.
ARE Update is a bimonthly magazine published by the Giannini Foundation of Agricultural Economics to educate policymakers and agribusiness professionals about new research or analysis of important topics in agricultural and resource economics. Articles are written by Giannini Foundation members, including University of California faculty and Cooperative Extension specialists in agricultural and resource economics, and university graduate students. Learn more about the Giannini Foundation and its publications.
Source: University of California Division of Agriculture and Natural Resources