The Economics of Proposition 12

“While the Constitution addresses many weighty issues, the type of pork chops California merchants may sell is not on that list.” So wrote Justice Neil Gorsuch who drafted the U.S. Supreme Court Decision in National Pork Producers v. Ross. The National Pork Producers Council (NPPC) and American Farm Bureau Federation filed the suit alleging California’s Proposition 12 violated the U.S. Constitution’s dormant commerce clause. The Supreme Court, in a split decision, disagreed. Proposition 12, enacted through a referendum by California voters, bans retail sales of all pork in California from hogs kept in gestation crates, as well as their offspring, even if the hogs were raised in other states. 

The enactment of the California law will have economic repercussions for both pork producers and consumers. Presently, ten states have banned the production of pork using gestation crates. Yet most pork production occurs in states without bans (Figures 2 and 3). Only Ohio and Michigan produce more than one percent of the U.S. pork output while banning gestation crates. Danielle Ufer of the USDA Economic Research Service estimates that by 2026, less than 8 percent of the U.S. breeding hog inventory will be covered under a gestation crate ban. California produces one-tenth of one percent of the nation’s pork and consumes 2.25 billion pounds, or 13 percent of the nation’s pork consumption. California imports nearly all the pork it consumes, meaning the costs of converting to gestation-free production will be borne by out-of-state producers.

Figure 2. State Banning Veal and Gestation Crates

Source: Danielle J. Ufer, State Policies for Farm Animal Welfare in Production Practices of U.S. Livestock and Poultry Industries: An Overview, USDA Economic Research Service, December 2022.

Figure 3. States with More than One Percent of U.S. Pork Production

Source: Danielle J. Ufer, State Policies for Farm Animal Welfare in Production Practices of U.S. Livestock and Poultry Industries: An Overview, USDA Economic Research Service, December 2022.

Research published in 2011 found that converting production away from gestation crates would result in a 9 percent increase in the cost per pound of producing finished hogs. One can safely assume the costs are higher today. The president of NPPC, a hog producer from Minnesota, estimates the cost of compliance would be $3,500 per sow. And costs for pork processors will rise too due to the need to track and label pork products to assure California’s requirements are met. Research published in 2021 by agricultural economists at the University of California-Davis estimated retail pork prices in California would increase 8 percent, or $0.25 per pound, reducing demand by 6 percent, and resulting in an annual loss of $320 million in economic benefits for consumers. The impact on U.S. consumers outside of California is expected to be small. 

It is certain Proposition 12 will result in economic adjustments in the pork sector. Pork consumers in California will pay higher prices. Pork producers will see higher costs to convert to gestation-free production. The scope, magnitude, and who bears the higher costs is uncertain.