Although it received ample coverage in the ag media when it passed in 2018 by referendum 60/40, apparently pork producers took California Proposition 12 as far from a done deal. Well, a few did – an estimated 4% modified their facilities and are able to produce pork that meets the new standards.
Prop 12 specified that by 1 January 2022, pork sold in the Golden State will have to meet higher standards of animal welfare, notably elimination of crates and more room per pig. Hog producers in the Midwest especially are concerned, with one CEO predicting pork price increases of 50% - or more. This seems unlikely to me, except in California. The state consumes 15% of all U.S. pork. Cutting that supply by two-thirds could certainly mean astronomical prices there. But as hog market analysts consistently point out, pork consumption eventually equals pork supply, so that freed up production will be absorbed by 49 other states. This suggests lower pork prices outside California, as retailers cut prices to unload that sudden surplus. California may be doing shoppers elsewhere a favor.
Another wild card is the EU, which has been phasing in even more stringent standards since 1999. Powerhouses like Denmark could meet Prop 12 regulations today. Imports from such sources to California are not unthinkable given the likely nosebleed pork prices that the shortage could cause there.
Producers may have assumed that some political magic or court ruling would make this all go away. I have doubts. The court cases and precedents don’t seem to offer a lot of hope. For example, if the state of Texas can essentially dictate how all US history textbooks are written because they are the largest market, why shouldn’t California be able set the bar for pork production?
Meanwhile, what about those few in the pork industry who did take the voters of California at their word over 3 years ago and made the investments needed to comply? A case for economic justice could be made that they are entitled to profits from their foresight and risk. Premium prices in California might be just what is needed to encourage and fund the investments necessary for some early adopters. If this regulation goes into effect as planned, it will be disrupting but not more than producers and consumers can bear, and an issue markets will solve faster than many predict.
