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Prop 12 offers no benefit to consumers, animal welfare

Getty Images/iStock Photos Sow gestation crates Getty1068384374.jpg
PROP 12 HEADACHES: CDFA just released a proposed rule on how to comply with new space requirements for gestating hogs. The industry remains concerned about how the rule would be implemented that creates higher costs for consumers and actually doesn't improve animal welfare.
CDFA admits in rule cost benefit analysis that Proposition 12 increases costs to consumers and pork producers.

The North American Meat Institute says the State of California’s Proposition 12 provides no benefit to consumers and increases breeding sow mortality, according to the state’s own proposed rule. The industry group made the remarks in a reply brief in support of its petition to the U.S. Supreme Court for a writ of certiorari to the United States Court of Appeals for the Ninth Circuit, and in response to the defendants’ previously submitted briefs.

The National Pork Producers Council, along with the American Farm Bureau Federation, is also currently in a separate litigation before the 9th Circuit Court of Appeals challenging Proposition 12. Oral arguments were held in mid-April and a court ruling is anticipated by mid-summer. NPPC continues to sound the alarm of the negative impact of the rule, especially as California has delayed proposing reules for implementation. 

The California Department of Food and Agriculture released the proposed rule, originally due in September of 2019, on May 28. However, a final rule faces an uphill battle to get Proposition 12 implemented by January 1, 2022. NPPC says it plans to comment on the proposed rule ahead of the July 12 comment deadline and also is exploring all avenues to challenge how it could be implemented or extending the timeline for implementation.

“The recently proposed rule by the California Department of Food and Agriculture admits there are no benefits to Californians as a result of Prop 12. CDFA admits deaths of breeding sows will increase. Both are unintentional consequences of a costly and unconstitutional law,” says Julie Anna Potts, president and CEO of the North American Meat Institute. “Our petition to challenge the law has the support of more than 20 states, and we think it should be reviewed by the Supreme Court.”

The proposed rule estimates costs will reach greater than $100,000 per year for a typical breeding hog farm due to “smaller inventory of breeding pigs, lower piglet output per animal and increased breeding pig mortality.”

CDFA acknowledges that animal confinement space allowances prescribed in the Act (cage-free for egg-laying hens, 43 square feet for veal calves and 24 square feet for breeding pigs) “are not based in specific peer-reviewed published scientific literature or accepted as standards within the scientific community to reduce human food-borne illness, promote worker safety, the environment, or other human or safety concerns.”

The proposal also says it “does not directly impact human health and welfare of California residents, worker safety, or the State’s environment…”

And discussing benefits to human health, worker safety or the state’s environment, CDFA says, “The Department has made an initial determination that the proposed regulatory action will have significant, statewide adverse economic impact directly affecting California businesses including the ability of California businesses to compete with businesses in other states.”

CDFA also identified higher costs for schools, universities, prisons and county jails. In total, it is expected state costs for school meals to increase by $1.84 million in the first full school year after egg laying hen and breeding pig confinement standards move to cage-free and twenty-four square feet, respectively. The state costs for student meal plan subsidy at state colleges and universities is to increase $1.32 million for the first full academic year following enactment. CDFA estimates $4.68 million higher food costs at prisons due to the changes.

Finally, the agency identified an impact Prop 12 is likely to force low income consumers to pay more for food. “Covered pork and especially covered egg products will become more expensive to consumers starting in January 2022 because of the animal confinement standards mandated in statutes. … Therefore, the Act will disproportionately reduce food purchasing power of low-income consumers. … Food consumers most affected will be those low-income consumers that are not enrolled in assistance programs.”

Further consolidation

In a letter to Secretary of Agriculture Tom Vilsack, NPPC President Jen Sorenson shared a new analysis from Barry Goodwin, an economist from North Carolina State University, which found if Prop 12 is implemented, the costs to producers will be catastrophic.

Rabobank estimates that California, which consumes 15% of the U.S. pork supply, will see supplies cut by more than 50%. Much of the pork that was previously destined for California will likely be diverted to other states, causing the value of pork in other states to crash. “So, while California consumers will see astronomical increases in the price of pork, pork markets outside of California will be forced to absorb a wave of surplus pork and crashing values for market hogs from noncompliant sows,” Sorenson says.

Proposition 12 will increase the number of smaller hog operations going out of business. According to Goodwin, the pork industry will become more concentrated with fewer but bigger farm operations. He concludes that the stresses placed on the entire production and marketing chain will favor larger processors, thereby leading to ever-increasing consolidation and concentration of the industry.

“The industry will be required to take on new identity and market segmentation procedures,” Sorenson explains in the letter. “This will involve considerable changes in the logistics of pork product distribution. These costs will have a more severe impact on smaller, independent operations. These operations, whether on the farm or processing side, tend to be higher cost and have lower profit margins. Smaller operations also have less access to the credit needed to finance renovations and new construction.”

Consumers and producers impacted

While speaking at the World Pork Expo, Michael Formica, NPPC assistant vice president and general counsel, says it’s difficult for farmers to know what to do without the finalized regulations. There are some discussions with packers and producers discussing premiums if you could be Prop 12 compliant, but without final regulations that isn’t even known.

Formica adds it’s also unknown regarding record keeping requirements and what the certification system looks like for compliant producers.

“We are running down every potential option,” Formica says of finding solutions in ongoing conversations with CDFA, Gov. Gavin Newsom, as well as those in the restaurant industry. “We’re hopeful that the political reality of what Prop 12 is going to impact in not just the Midwest where hogs are raised, but also for the Californian consumers,” he says including the Latino and Asian population that prefer pork as well as many restaurants and grocers.

Court challenge’s importance

The rule estimates 6,546 egg producers and 1,236 pork producers would be impacted, but that includes only those producers located in California. The rule would require all producers who ship to California to also meet those production standards.

The case challenges whether the U.S. Constitution permits California to extend its police power beyond its territorial borders by banning the sale of wholesome pork and veal products sold into California unless out-of-state farmers restructure their facilities to meet animal-confinement standards dictated by California.

The Meat Institute urged the Court to grant review because the “Ninth Circuit’s decision conflicts with the decisions of other federal courts of appeals on the question whether the Constitution limits a State’s ability to extend its police power beyond its territorial borders through a trade barrier dictating production standards in other States and countries.”

Allowing Prop 12 to stand “insulates in-state farmers from out-of-state competition, while imposing crushing burdens on out-of-state farmers and producers who have no political voice to shape the regulations that California has unilaterally determined to foist upon their operations outside of California.”

 

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