After a California animal-welfare law took effect, feared pork shortages haven’t materialized. But the Golden State is paying higher prices.
Last July, as California businesses braced for the impact of a long-delayed animal-welfare law, some market watchers worried that the new rules would lead to bacon shortages and sky-high prices. Worse, it was feared, California voters’ decision would ripple outward and increase pork prices across the rest of the country.
So far, the shortage fears have proven overblown. But one thing is clear: Californians are paying more for certain cuts like bacon and pork loin at the grocery store, according to checkout scanner data analyzed by the U.S. Department of Agriculture.
They are buying less of it, too. It isn’t yet clear whether these trends will persist in the long term.
In 2018, California voters overwhelmingly passed Proposition 12, a ballot initiative aimed at ensuring farm animals have space to move around. Instead of being confined to a small pen, under the new law a breeding pig is entitled to 24 square feet of space. Egg-laying hens get a guarantee of one foot by one foot cages. The ballot initiative was backed by several animal rights groups. Supporters collectively spent more than $9 million on the campaign, according to state political spending disclosures.
The part of the law that applied to pork proved a sticking point. Pregnant sows are typically kept in narrow crates where they can’t turn around, and the new rules required that they be able to rotate a full 360 degrees. At the time the rule was passed, less than 1% of U.S. hogs were reared in a manner that complied with Proposition 12.
Yet times were already changing. Several U.S. states, the European Union, Australia, Canada and others had passed legislation banning the use of so-called gestation crates for pig housing. As far back as 2012, companies including McDonald’s and Costco committed to phasing out cramped stalls for breeding sows. (When McDonald’s didn’t hit its 2022 deadline, activist investor Carl Icahn got involved.)
What was unique about the California initiative was that it applied to all meat and eggs sold in the state—not just the products that were farmed there. This meant farmers in the Midwest would have to retrofit their hog operations to suit the preferences of the California clientele.
Passage of the ballot initiative generated backlash from several business groups involved in growing and selling pork, including retailers, restaurants and hog farmers. An industry coalition describing itself as the Food Equity Alliance rolled out an analysis suggesting that Proposition 12 would have a disproportionate impact on Hispanic, Asian, and Black consumers’ wallets because it claimed those populations tend to eat more pork. The National Pork Producers Council (NPPC), an industry group, also claimed farmers would have to spend $3,000 to $4,000 to build new pens, though the trade magazine Pork Business outlined other options that would cost between $17 and $600 per animal.
Lawsuits slowed the rollout of the pork provisions from Proposition 12, and in 2023 a case brought by the NPPC made it all the way to the U.S. Supreme Court, which upheld California’s law. The NPPC wasn’t immediately available to comment for this article.
It has now been more than a year since the Supreme Court ruling. The law took full effect in January 2024, after a transition period that began last July.
Bacon and other cuts bear the brunt
Retail prices in the state initially saw a sharp increase, then remained roughly steady. In the first week of June 2024, bacon prices in California were up 25% compared with a year earlier, pork loin prices were up 1.3%, and pork ribs were up 31%. In the rest of the country, bacon prices are up to a lesser extent, and ribs and loin have remained roughly flat.
Prices might settle out or fall as producers grow more hogs in compliant housing, said Seth Meyer, the USDA’s chief economist. As of April, about 2% of pork produced in the U.S. complied with California law. “You’ve got some biological lags here, and we might expect more noise,” he said.
While some of the price increase is attributable to changes at the farm level, much of it comes from what happens during butchery.
“You’ve got to figure out how to either have a plant or a day dedicated to the slaughter of only California or non-California compliant animals,” he said.
Further complicating the math, the Proposition 12 rules don’t apply to all the parts of an animal. Bacon, ribs and loins are covered, but ground pork isn’t. That means producers don’t earn a premium for ground pork, even when it comes from compliant animals. “The costs all have to fall on the cuts which have to comply,” said Meyer.
The USDA hasn’t studied the question of whether California welfare rules are pushing up pork prices in other states, though Meyer said impacts outside of the state were likely “modest at most.”
The price increases seem to have had an impact on pork sales in the Golden State. In the past, Californians have consistently purchased between 9% and 12% of the nation’s pork. Since the law was implemented, the proportion has dropped to between 6% and 9%.
The debate goes nationwide
Animal rights advocates and pork industry stakeholders were closely watching as the courts considered a legal challenge to Question 3, a similar animal welfare law passed in 2016 in Massachusetts.
If states continue to pass copycat laws, at some point the industry might find it simpler to shift swaths of production to the less-confined model mandated by California. It is an outcome that animal welfare advocates are hoping to see, and one that the pork industry has fought fiercely.
In a recent report, NPPC touted that it successfully kept animal welfare questions off the ballot in Colorado. Industry groups have also pushed for language in a coming farm bill to make animal welfare the domain of federal regulators. Challenges to Proposition 12 are continuing.
In July, a federal judge upheld the Massachusetts law.
In his ruling, Judge William G. Young noted that the pork producer plaintiff, Triumph Foods, had already implemented a system for separating Massachusetts-compliant hogs from the rest of the herd.
Young estimated the company was already processing enough pigs that met the standards to satisfy recent Massachusetts demand six times over.
Article Source: WSJ Pro
