California case one to watch for Canadian producers

Opinion

California’s infamous Proposition 12 has become a fascinating case study of voter-consumer behaviours as data emerge on the effects of its newly imposed animal welfare laws.

More importantly, it’s a case study with ominous overtones for Canadian farmers as they watch the coveted U.S. market splinter along state lines into a bunch of mini-markets making their own rules controlling access to their consumers.

There are a few surprises in the recently released analysis by USDA economists tracking the early impacts of a law that sets minimum space standards for pregnant sows producing pork destined for sale in California — including from Canada.

Grocery store prices rose by more than expected as the law transitioned into full effect beginning in July 2023. On average, they are up about 22 per cent. Consumption has fallen, but by less than some anticipated. And the dire impacts predicted for the rest of the pork supply chain have so far been muted, buried in the usual marketplace noise pushing prices one direction or the other.

Proposition 12 states that pork sold in California must come from hogs in production systems that provide pregnant sows a minimum of 24 square feet each. While many Manitoba producers have moved to group sow housing, they may not meet that somewhat arbitrary space allocation.

To become compliant, hog producers must either incur the capital cost of installing more barn space, which the industry estimates costs $3,500 per sow, or reduce the number of sows housed in existing facilities, which reduces their output.

So far, it appears the California market isn’t big enough to unduly influence the entire supply chain, yet it is big enough to make it worthwhile for producers so inclined to meet the standard. It’s expected the price differences in California will shrink once more compliant producers come on stream.

There are some nuances to how the law is applied. Only fresh, whole pork cuts such as bacon, ribs and loins are covered, whereas processed or mixed products such as sausage are not. So it’s unknown at this stage how much of the market is affected by consumers choosing sausage instead of bacon for breakfast.

Keep in mind that California consumers got what 63 per cent of them voted for on their 2018 state ballot, but it’s unlikely they were thinking on voting day about the price impact.

California’s share of national consumption has fallen from 10 per cent to eight per cent, which is significant, but not a strong case for arguing that consumers are abandoning pork in droves to protest higher prices.

That’s consistent with a consumer survey by Purdue University economists last year before the law took full effect. It found consumers would be less likely to reduce their purchases if price increases were due to improved animal welfare.

Industry will be watching closely as this plays out over the coming months and years. For starters, this law isn’t going away any time soon. Imagine asking voters to support a “hog production efficiency” proposition. Pity the person who must write that one up for the ballot.

The U.S. Supreme Court, the same Trump-stacked bench that turned abortion access in the U.S. into a state-by-state decision, has also rebuffed efforts by the animal industry to have it ban individual states from regulating market access.

Efforts to convince federal politicians to legislate against it are getting nowhere. U.S. politics at the national level are so polarized that legislators have trouble passing bills to keep the government operating. It’s an election year. Expect more national hot-button issues to be turned over to the states, rather than fewer.

The biggest threat to Canadian farmers is that more states are eyeing rules that are similar, but not necessarily the same. How do you make long-term production investments based on short-term politics and highly variable rules?

Producers north of the border can have their opinions about all this, but they don’t get a vote. And the risk of stating their opinions too loudly is that they become the target.

Laura Rance is executive editor, production content lead for Glacier FarmMedia. She can be reached at lrance@farmmedia.com