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California law could bankrupt Midwest farms

IPGGutenbergUKLtd / iStock / Getty Images Plus Supreme Court and California anilmal protection laws
Will the Supreme Court ignore the Constitution’s Dormant Commerce Clause?

The Supreme Court this fall could reach a decision that makes pandemic supply chain disruptions pale by comparison.

A few years ago California voters passed Prop 12, an animal welfare law that sets minimum space requirements for hens, veal calves and perhaps most important, the state’s breeding sows. California’s regulations call for limited breeding stalls and space requirement for sows of 24 square feet; industry average, according to Rabobank, is 18 to 20 square feet.

Tough luck for California hog farmers, right? But what is by far more worrisome is that the law prohibits the sale in California of ALL products from animals not raised in compliance with the new rules, regardless of their origin.

So, come Jan. 1, 2022, any U.S. hog farmer with sow herds will have needed to invest potentially millions to upgrade facilities to meet California’s arbitrary requirements. Today an average barn might cost $1,600 to $2,500 per sow; Under California’s animal-confinement rules, compliant barns are “averaging as much as $3,400 per sow,” says Rabobank analyst Christine McCracken.

Chaos ahead

If the law stands, in California at least, the humble and delicious carnitas could become more costly than a porterhouse steak. Poorer Latino groups would be hurt most. That would be an unintended consequence most voters probably never thought about when they were sweet-talked by Humane Society of the United States do-gooders to vote yes on Prop 12 back in 2018.

Conversely, the rest of the country would see a glut of supply, dropping hog prices and damaging grain demand.

Currently less than 4% of the nation’s sow farms have made the needed structural changes to meet California’s animal welfare requirements. While California itself constitutes a whopping 15% of U.S. pork demand, only 1.9% of U.S. pig production comes from the Golden State. RaboResearch estimates that ‘compliant’ pork supplies could fall 50% short of California’s needs on January 1, 2022.

Supreme Court impact

At the beginning of this column, I mentioned the Supreme Court “could” reach a big decision impacting supply chains. In the past three years several groups have tried and failed to stop this law. The North American Meat Institute filed a petition asking the U.S. Supreme Court to review Prop 12 – and the Supreme Court denied the petition. A separate lawsuit filed by the National Pork Producers Council and the American Farm Bureau Federation that requests Prop 12 be rejected as unconstitutional under the dormant commerce clause is still pending. Oral arguments were heard in April; a decision was expected this month. Although NPPC is still waiting on the court ruling it has more recently called for a delay in implementation.

For what it’s worth in my opinion, NAMI had the best chance of blocking the law. That’s because it brings to question the U.S. Constitution’s Dormant Commerce Clause, which prohibits states from passing legislation that discriminates against or excessively burdens interstate commerce. “Of particular importance here is the prevention of protectionist state policies that favor state citizens or businesses at the expense of non-citizens conducting business within that state,” explains Cornell Law School.

That describes Prop 12 in a nutshell.

And it is also why 20 states filed a brief supporting the NAMI case. If California is allowed to apply its laws to conduct in other states, “a single state will dictate policies in all others, encouraging a patchwork of regulations and threatening the free flow of interstate commerce,” notes NAMI CEO Julie Anna Potts.

Institutions at risk

From federal elections to the U.S. post office, the last year has seen many of our highest and most treasured Democratic and Capitalistic institutions tested. Now the rules that oversee interstate commerce are being challenged. The question in this case is whether the U.S. Constitution permits California to extend its police power beyond its territorial borders by banning the sale of pork and veal products sold into California unless out-of-state farmers restructure their facilities to meet animal-confinement standards dictated by California.

If allowed to stand, the nation would be forced to create a two-tiered supply chain just to meet the arbitrary requirements of one state. Unfortunately, that would open the door to all kinds of interstate barriers. Think about the many activist groups who would love to persuade well-intentioned but ag-illiterate voters to join their cause. Soon you would see a groundswell of state-by-state arbitrary laws banning all kinds of completely safe food products from entering a particular state where the voters had been hoodwinked.

This is not a hog issue. It’s an American agriculture issue.

I have nothing against California or its well-intentioned voters. But years ago we began warning readers that emotion-based consumer activism would begin taking precedent over science and unbiased research in best food and farming practices. Now we’re seeing it play out in a way that could jack food prices, cause real economic damage on the farm, and make supply chains super inefficient.

We all want to keep animals safe but creating a patchwork of state animal welfare regulations is not the way to create meaningful change in how we produce food.

The Supreme Court could uphold the Commerce Clause and the California rule could collapse. If so, the state’s political leaders better be ready to explain why so many millions of dollars and time were wasted on this effort. Maybe someone needs to think twice the next time HSUS comes calling with a petition.

And if not? Get ready for a supply chain disruption that will make 2020 feel like a walk in the park.

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