- Author: Ria DeBiase, Communications Director, Giannini Foundation of Agricultural Economics
The Prop. 12 pork panic is overblown, say UC agricultural economists, but so are the new law's benefits to hogs
California's Proposition 12 will soon require farms to add space for certain farm animals, including breeding pigs, or mother sows. As the January 2022 date for full implementation of Prop. 12 approaches, some pundits warn of upcoming bacon shortages and up to 60% higher pork prices, while others downplay any negative effects on Californians.
What are the real impacts of Prop. 12, which was approved by California voters in 2018?
UC Davis economists estimate that California pork consumers will lose $320 million per year (roughly $8 per person) from the market impacts of Prop. 12. California consumers will pay about 8% more for pork regulated under Prop. 12 and will consume around 6% less of that pork per year.
Co-author Richard Sexton, UC Davis distinguished professor of agricultural and resource economics, noted, “The roughly 9% of North American sows affected will each get about 20% more housing space. But, the additional space will be for those sows that already have more space, not those confined in small individual stalls.”
California's Prop. 12 is now set to be implemented as planned following the 9th Circuit Court's recent rejection of legal challenges. Republican senators from Iowa have proposed federal legislation to stop implementation of Prop. 12, fearing economic damage to their hog farmers, but federal action is unlikely. Meanwhile, Prop. 12 supporters claim that the new regulations will give more space to sows confined to stalls so small that they can't turn around.
Prop. 12 requires each sow whose piglets are raised for uncooked cuts of pork sold in California – about 9% of North American sows – to have a minimum of 24 square feet of space. Because Prop. 12 applies only to sows, not to their offspring who are raised for meat, it will apply to well less than 1% of the 90 million North American hogs.
Around 30% of North American sows are already in group housing with 20 square feet each, rather than confined in stalls. The high cost of converting stalls means that the California pork supply will come from sows already in group housing. “Thus,” said Sexton, “the California Prop. 12 regulations will not help those sows confined in stalls to gain more space and mobility.”
The added costs of 20% more space for group-housed sows that are transitioned to comply with Prop. 12 – plus the costs of segregation, product tracing and new labeling – will cause the cost of regulated pork products in California to rise by about $0.25 per pound. The UC Davis research also indicates almost no change in the prices of pork products sold outside of California.
To learn more about the coming impact of Prop. 12 on California consumers and the North American pork supply chain, read the full article by Ph.D. candidateHanbin Lee, Sexton and distinguished professor Daniel A. Sumner, all in the UC Davis Department of Agricultural and Resource Economics: “Voter-Approved Proposition to Raise California Pork Prices.” ARE Update 24(6): 5–8. UC Giannini Foundation of Agricultural Economics: https://giannini.ucop.edu/filer/file/1629132628/20134.
ARE Update is a bimonthly magazine published by the Giannini Foundation of Agricultural Economics to educate policymakers and agribusiness professionals about new research or analysis of important topics in agricultural and resource economics. Articles are written by Giannini Foundation members, including University of California faculty and Cooperative Extension specialists in agricultural and resource economics, and university graduate students. Learn more about the Giannini Foundation and its publications at https://giannini.ucop.edu.
- Author: Pamela Kan-Rice
Empty grocery store shelves are troubling enough to California consumers who are accustomed to abundant supplies. To hear about farmers dumping milk, crushing eggs and plowing under crops when demand for food is strong just doesn't make sense to most consumers. Although the new coronavirus crisis has currently derailed the connection between supply and demand, “the food system in the United States is resilient and there is little reason for alarm about food availability,” write University of California agricultural economists.
Overall, neither food consumption nor the amount of food supplied by farms have changed much, they write in a new article published by UC's Giannini Foundation of Agricultural Economics. The authors explain that the sudden closure of schools, restaurants and other institutions, coupled with residents in many states sheltering in place to reduce the spread of COVID-19, has disrupted normal patterns of where people buy food.
“Price changes, surpluses and shortages along the food supply chain are likely the result of recent and temporary shocks to supply, demand or both,” said co-author Ellen Bruno, UC Cooperative Extension specialist in the Department of Agricultural and Resource Economics at UC Berkeley.
“On the demand side, we have seen customers shift to buying more food at the grocery store as restaurants and other food service businesses have closed. Plus, consumers have changed what they consume and stockpile during these times,” she said.
Initially, worried consumers stocked up on staples such as rice and pasta that store well. Then, with more free time, they started cooking at home and baking their own bread and pastries, buying up eggs, flour, sugar and other baking supplies.
“On the supply side, there are challenges in trying to rearrange production and packaging to service grocery stores, as opposed to restaurants, schools, etc. which often purchase items in different quantities,” Bruno said. “Plus, there are the obvious health concerns and potential disruptions due to the impact of the virus on the workers themselves.”
How quickly the food supply system will adapt to changing demand depends on the product, according to Bruno and her co-authors Richard J. Sexton, UC Davis professor, and Daniel A. Sumner, director of the UC Agricultural Issues Center and UC Davis professor, both in the Department of Agricultural & Resource Economics. Canned fruits and vegetables are often processed shortly after harvest and can be moved from storage to retail fairly quickly. To increase egg production, farmers have to add to the number of laying hens, which takes months. Many perishable produce items are planted, harvested, packed and shipped according to a precise schedule to replenish grocery store inventories “just in time” so farmers can't quickly increase the amount of fresh fruit and vegetables they supply.
Produce wholesalers who sell to food service have products and packaging specifically designed for that market. For example, packing plants that prepare large bulk salad packages for restaurants aren't set up to pack salad into retail-ready bags that require consumer labels. While adjustments were made, some fresh produce rotted or was plowed under.
After the COVID-19 disruption ends, the authors expect the food supply chain to evolve as the economy gradually recovers.
“In the longer term, even after restaurants and the food service industry are back and running, reduced incomes due to the recession will change our consumption patterns,” Bruno said. “Demand for food consumed at home doesn't change much with income, but demand for food at restaurants does. In many ways, food service and the growers that supply directly to food service will be hardest hit by all of this because they suffer both in the short run with mandatory closures and in the long run with an economic recession.”
Although it's uncertain how long the pandemic will last, the authors say Americans will have an adequate supply of safe, healthy food.
“Despite these disruptions, overall our food supply chain is robust and adaptable,” Bruno said. “Nothing in the underlying economics suggests that there will be a lack of food available.”
To read “The Coronavirus and the Food Supply Chain,” visit https://bit.ly/covidimpactonfood.