Threat: New Calif. Pork Producer Regs Will Fuel Rocketing Prices

P. Gardner Goldsmith | August 6, 2021
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In a few months, California will begin enforcing new “regulations” (i.e. government threats) directing farmers to create more “space” for breeding pigs, egg-laying chickens, and veal calves. And shocker, the move is expected to push prices higher at a faster pace than they already are rising.

As ABC News reports, it’s the result of a 2018 statewide proposition that passed “overwhelmingly.”

National veal and egg producers are optimistic they can meet the new standards, but only 4% of hog operations now comply with the new rules. Unless the courts intervene or the state temporarily allows non-compliant meat to be sold in the state, California will lose almost all of its pork supply, much of which comes from Iowa, and pork producers will face higher costs to regain a key market.

And, as is typical with government, though the state deadline for those raising or selling pork in the state is January 1, 2022, the actual footage size per head is unknown. The government hasn’t told anyone what that is:

Hog farmers said they haven't complied because of the cost and because California hasn't yet issued formal regulations on how the new standards will be administered and enforced.

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It must be fun to be at the mercy of the government bureaucrats who live off your own income, and then to see said bureaucrats operate so slowly. They make it nearly impossible for you to make any important plans. But, it must be reiterated, this California rule not only applies to hog farmers IN the state, it applies to farmers shipping their animals or the meat products to California.

Pork production in California is insufficient to handle demand, so, of course, supermarkets, restaurants, and others in the demand chain rely on outside sources.

California's restaurants and groceries use about 255 million pounds of pork a month, but its farms produce only 45 million pounds, according to Rabobank, a global food and agriculture financial services company.

And if the out-of-state sources cannot initiate breeding at about this time, then, by January, 2022, they will be unable to offer sufficient pork supply to meet California-based demand. The loss could be devastating.

If half the pork supply was suddenly lost in California, bacon prices would jump 60%, meaning a $6 package would rise to about $9.60, according to a study by the Hatamiya Group, a consulting firm hired by opponents of the state proposition.

Kudos to ABC News for covering this. But, as it often is with pop media, they miss the larger economic picture.

This California mandate will affect not only California pork prices. It will affect all U.S. pork prices. In its piece, ABC News correctly notes that California represents 15 percent of the overall U.S. pork market. And the network does take a moment to recognize that when out-of-state pork producers try to conform to the California space requirements, they will not be able to raise as many animals, thus, one reads:

In Iowa, which raises about one-third of the nation's hogs, farmer Dwight Mogler estimates the changes would cost him $3 million and allow room for 250 pigs in a space that now holds 300.

But the network misses the broader range of unintended consequences the California rule will have for all pork consumers. A mandated increase in space-per-head means either fewer head, purchases of more space (higher prices), or a shift from the raising of pork to the raising of, say, cattle, some other animal, or a crop. This has ripple effects across the U.S. and across the other branches of agriculture.

It’s the kind of problem on which I reported in 2007, when then-President George W. Bush proudly showed his constitutional and economic ignorance by having his Environmental Protection Agency (a product of Richard Nixon’s White House wrangling) mandate higher “ethanol content” in U.S. fuel. This increased the price of corn, which is the basis for U.S. ethanol -- and is, itself, a net energy loser, requiring more fuel to sow, reap, distill, and transport, than the energy that corn-based ethanol actually offers when burned.

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As I noted at the time, Cuban "President" Fidel Castro (of all people!) published a piece making a shockingly correct prediction that Bush’s mandate would see higher prices for corn world-wide. And, as I wrote, it also would change field-space allocation for farmers who might shift from peas or soy to corn because of the artificially higher demand caused by Bush’s EPA mandate.

It was rare for thug Castro to be right on economics, but he made a valid point -- a point that the leftists in California might want to consider when thinking about their pork, poultry, and veal mandate.

This is not to discount concerns for animal welfare. It is merely a reminder that if people truly are concerned about animal welfare, government mandates are not an ethical or economically proper way to effect change – even if a vast majority of voters want change.

That fact, itself, indicates that there are sufficient numbers to prompt change through the market. Buyers always have the choice to buy or not to buy, and, already, Californians have the power of the purse to show that they want to know about the way the animals are treated. If there is a market, suppliers will cater to it.

By choosing, instead, to use government force, the voters have opened a Pandora’s box and have left suppliers high-and-dry, waiting for bureaucrats to tell them how to operate. Questions abound, and they’re not isolated solely to the footage-per-head question.

As ABC also noted:

The California rules also create a challenge for slaughterhouses, which now may send different cuts of a single hog to locations around the nation and to other countries. Processors will need to design new systems to track California-compliant hogs and separate those premium cuts from standard pork that can serve the rest of the country.

The problem is not that the rules might change. The problem is that the government assumes the power to tell sellers and buyers how to freely engage in market exchange.

The lessons are numerous and wide-ranging. Political intervention in market agreements is a mistake, both morally, and economically. And this California trouble is another in a long line of examples.

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