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SCOTUS Consideration of the Appeal by Pork Producers

07/05/2022

Following the EGG-NEWS Editorial on July 1st concerning the agreement by SCOTUS to hear the petition by the National Pork Producers Council, Drs. Richard J. Sexton and Daniel A. Sumner, at the University of California, Davis provided a copy of their amicus curiae brief. EGG-NEWS is indebted for their submission that was prepared to inform the Court of the economic aspects and implications of Proposition #12, with regard to group housing of sows as mandated by Proposition #12. 

 

Dr. Sexton is a Distinguished Professor of Agricultural and Resource Economics and a Fellow and Past-president of the Agricultural and Applied Economics Association.  Dr. Sumner served as a Senior Economist for the President’s Council of Economic Advisors from 1987 to 1988 and was Deputy Assistant Secretary of the USDA from 1990 to 1992.  Their research focuses on national and international agricultural economics and policy, and they are well positioned to comment on the costs relating to Proposition #12.  A summary of their research on the topic was included in a comprehensive article* that concluded: -

 

  • The additional cost of compliance with Proposition #12 will be insignificant to U.S. pork producers, given that California requires nine percent of U.S. pork with 99 percent supplied by other states. This conclusion is based on the reality that at least 20 percent of sows are group-housed and will be able to supply California without extensive additional capital installations.  The authors of both the article and the amicus brief note that California Proposition #12 imposes housing systems for sows that produce a commercial generation supplying pork to the state of California. The regulations do not apply to sows indirectly producing pork supplied to other states.
  • It was calculated that the additional cost to comply with California Proposition #12 including increased mortality, lower litter size and both fixed and variable costs would amount to $5 per weanling pig, representing an additional retail value of 3 cents per lb.
  • Consumers in California will pay an additional 7.7 percent for pork at retail, amounting to $320 million, annually.  The increase in unit price of pork will reduce consumption in California by approximately six percent.

 

Drs. Sexton and Sumner note that the analysis submitted by the National Pork Producers Council and the American Farm Bureau Federation, “rests on the unsupported and plainly incorrect assumption that all pork producers nationwide will be forced to comply with Proposition #12 and that the cost of complying with Proposition #12, accordingly, will be passed onto all pork consumers nationwide”.

 

Accordingly Drs. Sexton and Sumner consider that Petitioners’ arguments are flawed and factually implausible, since Proposition #12 will affect only “a discrete subset participants in the North American pork value chain”.  The brief by the amici maintains that Proposition #12 does not compel “any actor within the supply chain to convert operations to comply with Proposition #12.  The amici concluded that since California will continue to consume pork, “The supply chain must be incentivized through higher prices to supply compliant pork products to the state.”

 

The amicus brief considers only suppliers to California and consumers in that state.  Effectively, passage of Proposition #12 and its implementation has resulted in a number of restaurant chains and retailers requiring suppliers of pork to conform to the requirements of Proposition #12, extending the economic burden of group-housing of sows.  This is an aspect of California Proposition #12 that should be evaluated in relation to the claims made by the Petitioners.

 

In many respects, the situation faced by hog farmers is similar to egg producers with hens confined in conventional cages.  Following the passage of Proposition #2 in 2008, investment in conversion to alternative systems, including aviaries and floor units were implemented. As of June 2022 close to a third of hens are now compliant with Proposition #12.  Individual states have enacted legislation to ban cages and New England states have passed ballot initiatives similar to California Proposition #12 extending the need to transition from conventional cages. In addition almost all restaurant and retail chains and independents provided assurances in 2020 that all eggs would be sourced from hens held in housing other than conventional cages by 2025. The commitments made under coercion by animal welfare associations appear to be fraying. The obvious implication is that by 2025 a substantial proportion of the U.S. nominal complement of 325 million hens will still be housed in cages allowing choice by consumers based on price in relation to housing.

 

Although SCOTUS may take into account the economic impact of Proposition #12, the major issue facing the Justices is whether California can impose standards on other states that clearly impede interstate commerce, without any clear justification based on public interest, including but not limited to avian or human health.

 

*Lee, H., L., Sexton, R. J. and Sumner, D. A. (2021) Vote-approved Proposition to Raise California Pork Prices. ARE Update 24:5-8. University of California, Giannini Foundation of Agricultural Economics.