House Ag Examines Prop 12 Econ Effects

LINCOLN, Neb. (DTN) -- Without congressional action to limit California's Proposition 12, farmers, ag economists and legal experts said on Wednesday that a patchwork of state animal-husbandry laws will hurt small farms, will be unhealthy for livestock and harm consumers, during a hearing before the House Agriculture Committee.

The U.S. Supreme Court upheld Proposition 12 in 2023 and pointed to Congress as the most appropriate place to make changes to federal laws in response to the measure that limits sales of pork in California to those farms that follow certain livestock housing requirements.

Iowa farmer Matt Schuiteman told the committee that he's concerned swine health will suffer by following Prop 12 housing requirements.

"Management and husbandry of swine breeding stock is an area rife with misconceptions and misinformation," Schuiteman told the committee.

"In a sense, the intent behind giving sows more room to move around is pure. The swine industry has for years spent both capital and human resources to identify the best way to house the breeding herd."

The Sioux County farmer said swine housing has always revolved around the comfort and productivity of animals and the health and safety of the stockman.

"At the same time, it has been recognized that some freedom of movement can aid the health and longevity of the female while making minimal sacrifices to her production," Schuiteman said.

"Regulations dictating how sows are housed and managed during the production cycle add significant safety risk to those who are actually providing care to the herd. These decisions must stay on the farm and with the people who assume the risks that come with hands-on management."

Allowing Prop 12 to stay in effect, he said, has created the possibility that other states will develop similar regulations that could "create a complicated landscape" for interstate trade.

"Such state-specific regulations could disrupt the longstanding balance that has facilitated commerce between states," Schuiteman said.

"Small farms and family businesses may be particularly affected if state laws set standards that are hard for them to meet. This can lead to further consolidation, as smaller producers might struggle to keep up with larger operations that have more resources."

PROP 12 COSTS HIGH

Pat Hord, a pork producer from Ohio and vice president of the National Pork Producers Council, said not only does the California regulation harm animals, but farm compliance costs are substantial.

"Recent estimates show that new construction of Proposition 12-compliant barns can cost at least 15% to 20% more per sow than standard open pen gestation systems," Hord said.

"Retrofitting existing barns, though highly dependent on the starting point of the barn, could cost at least $100 per sow to provide the required square footage. This approach is also associated with at least a 30% reduction in throughput because of fewer sows and likely productivity impacts."

Hord said that to maintain sow herds, Prop 12 also has added higher operating expenses for things such as utilities, veterinary care, labor and other costs.

"While some farms, mostly larger ones, have access to sufficient capital to amortize and absorb the cost burden, smaller and independent producers have limited access to capital and cannot easily cover Proposition 12's costs," he said.

FARMS ON BOTH SIDES

Tiffany Dowell Lashmet, professor and extension specialist in agricultural law at Texas A&M University, said farmers have legitimate interests on both sides of the Prop 12 debate.

While there has been opposition to the California law from agriculture groups, including the National Pork Producers Council, there have been other farmers who have complied with and are benefiting from Prop 12.

"I believe it important to understand there are, as is true with many issues, agricultural interests on all sides of the Prop 12 debate," Lashmet told the committee.

"Certainly, there are agricultural producers, groups and businesses in favor of congressional action to overturn Prop 12. Similarly, there are agricultural producers, groups and businesses strongly against Congress taking such action, many of whom already went to the expense to comply after Prop 12 was passed and upheld by the court."

Large producers like Smithfield Foods have transitioned to group housing in response to Prop 12. Smaller farms, however, have faced challenges in affording compliance.

HIGHER CONSUMER PRICES

Holly Cook, an economist with the National Pork Producers Council, said California consumers are seeing higher prices for pork products.

That includes a 41% increase in pork loin prices, 17% increase in pork rib and shoulder prices, 16% increase in bacon prices, a 20% increase in fresh ham prices, and overall, 24% higher prices for covered products, Cook told the committee.

Travis Cushman, deputy general counsel of litigation and public policy for the American Farm Bureau Federation, said there's a narrative among supporters of Prop 12 that the legality of the law was settled by the Supreme Court. Read about that here: https://www.dtnpf.com/….

Cushman said the court's ruling left open a lot of questions about the role of states.

"Unfortunately, the high court's decision is so convoluted, so confusing, and so contradictory that no one can honestly articulate the state of the dormant commerce clause or how courts should proceed with similar claims," Cushman told the committee.

"As you know, you need five of the nine justices to agree with you to win a case. Six justices agreed with our legal theory. Five agreed that we had established enough facts to win on that legal theory. An easy win, right?

Not quite. In a fractured 5-4 decision, three justices found that the Constitution did not support our reading of the dormant commerce clause, and two justices agreed with our reading but found we had not alleged sufficient facts."

Rep. Angie Craig, D-Minn., ranking member of the House Ag Committee, said although Congress should act on the issues raised by Prop 12, it is important to consider all farmers.

"Even the Biden administration's ag secretary said we need to treat this issue seriously to ensure stability in the marketplace," Craig said in her opening statement.

"I agree that we cannot have 50 states with 50 different regulatory frameworks because of the significant challenges it would present to producers, but I believe that there are ways to avoid that situation. I also recognize that many pork producers have made significant financial investments to make their operations Prop 12-compliant to satisfy the desires of California's consumers for premium pork products. It would be unfair to the family farmers who updated their facilities to comply with new rules to keep or gain market access, to change the rules on them after they've already made these investments."

Cook said laws like Prop 12 favor larger farms because they can better afford compliance.

"As discussed previously, economies of scale allow a 5,000-head sow farm to make adjustments at a lower cost per pig than a 1,200-head sow farm," she said.

"Large farms may also have greater options for diversification and enjoy more favorable terms of credit. Additionally, the return to equity on hog farms is usually progressively lower for smaller farms, suggesting small farms are likely to realize less favorable terms of credit and which may impact their ability to undertake significant capital investments."

Todd Neeley can be reached at todd.neeley@dtn.com

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