California Proposition 12 Took Effect Jan. 1, But Supreme Court Action Ahead

Another California law could have major implications for hog producers, consumers

(Note: DC Signal to Noise podcast on Monday morning beginning at 9:15 a.m. ET will include comments on this topic from Michael Formica, AVP and general counsel for the National Pork Producers Council.)

A California ballot initiative took effect on Saturday that is expected to have major impacts on the pork industry and product prices. It is the Prevention of Cruelty to Farm Animals Act, also known as Proposition 12 (link). It was backed by the Humane Society and approved by 63% of California voters in 2018. Link to frequently asked questions.

The law establishes minimum space requirements for farm animals and prohibits the sale of meat from animals raised in housing that doesn’t meet its specifications. State regulators will inspect out-of-state farms to ensure they are in compliance. A business owner or operator — including supermarkets, restaurants and meat processors — found to be violating the law could be charged with a misdemeanor punishable with fines up to $1,000 or as many as 180 days in jail, as well as civil penalties. The law applies to uncooked pork. A restaurant typically sells cooked pork so they aren’t targeted. However, their suppliers will be subject to the law, which is why the restaurant industry is concerned. “Can’t cook pork, if you can’t purchase it,” summed up one source.

The bigger issue is the stand-up, turn around provision which fundamentally changes how sows are bred, industry sources note. Says one pork industry official: “Even group house sows won’t comply. In the best performing systems, after piglets are weaned off, sows are moved into individual pens for about 7 days to allow recovery and cut down on fighting, while the sows are bred to ensure the embryo can attach to the uterine wall before they are moved into a group housing. That has been outlawed if you want to sell into California. Most group systems actually keep them there about 35 days until they can confirm pregnancy. Those are also outlawed.”

Details: The law requires that egg-laying hens, calves raised for veal and breeding pigs (sows) be able to lie down, stand up, and turn around in the spaces in which they are housed without touching the sides of the stall or another animal. Hog farmers will be most affected. Most sows are housed in individual pens. Proposition 12 prescribes that sows must have at least 24 square feet of floor space to move around, which would effectively require large group pens. The law applies to any uncooked cut of veal or pork meat. One industry contact adds, “The 24 square feet is troublesome enough — it’s an arbitrary number, and a significant expansion of space (that will be completely unused) for group housing. But the real impact is the stand-up, turn around requirement and the lack of any flexibility around it.”

In the proposed California regulations issued over the summer, the California Department of Agriculture (CDFA) proposed defining the scope of products and transactions covered by Prop 12, recordkeeping and documentation requirements, registration requirements, and a third-party certification scheme, among other details.  The Updated Proposed Regulations make modest changes to the earlier proposed regulations in response to stakeholder comments.  But industry sources stress it is important to point out that these regulations were due to be issued on Sept 1, 2019.  “CDFA is 28 months late in issuing them, and likely won’t have them issued till mid-2022. That’s a big issue. How do you make investments into a system when it’s not clear what your required to do?” asks one industry official familiar with the topic.

Hog farmers have repeatedly warned this could endanger the health and safety of sows. Aggressive sows might also attack other sows in their pens. Others note there is little if any evidence these space regulations reduce the risk of food-borne illness. With regard to pork, “there is ZERO evidence that the regulations have any impact on food borne illness. Even CDFA has admitted this,” a pork industry official said. “Supporters of Proposition 12 claimed it would improve animal welfare and food safety. The law fails to address either of those issues,” said American Farm Bureau Federation President Zippy Duvall. “Farmers know the best way to care for their animals. This law takes away the flexibility to ensure hogs are raised in a safe environment while driving up the cost of providing food for America’s families. Small family farms well beyond California’s borders will be hit hardest as they are forced to make expensive and unnecessary changes to their operations. This will lead to more consolidation in the pork industry and higher prices at the grocery store, meaning every family in America will ultimately pay the price for Prop 12.”

California accounts for about 13% of pork consumed nationwide, yet only about 0.1% of the nation’s pigs are born and raised there — Californians eat around one in every seven pounds of all pork consumed by Americans every year. Hog farmers say the costs of complying with Proposition 12 would be borne by every pork consumer in the country because of complex supply chains. In March 2021, Christine McCracken, executive director of the animal protein division at Rabobank, published a report (link) in which she predicted a Prop 12 pork shortage. According to the report, California eats about 15% of the nation’s pork, but only 4% of sows were raised in housing compliant with Prop 12. The National Pork Producers Council (NPPC) says less than 1% of U.S. pork meet’s Prop 12 standards and estimates that getting into compliance would raise production costs 9.2% at the farm level, or about $13 a pig.

Proposition 12 would also mandate tracking systems to certify that pork sold in California originated from a sow at a compliant farm. Such tracking systems have yet to be developed, and the state has yet to finalize rules detailing how businesses are supposed to comply. The CDFA didn’t propose rules for public comment to implement the law until May — about 18 months later than the date required in the ballot initiative. The agency proposed revisions on Dec. 3, but final rules aren’t expected until later this year.

The Updated Proposed Regulations include changes and clarifications to the following areas:

     Scope of Coverage of the Prop 12 Requirements

• Further clarifies that sales are deemed to occur where the recipient “takes physical possession” of the covered food, without regard to title transfer, use of agents, or other contractual terms.
• Revises the proposed definition of a “commercial sale” to remove “offer for sale,” “expose for sale,” and “possesses for sale” from the definition, which in turn affects what conduct is covered by Prop 12.
• Clarifies that sales made directly to federal agencies, made on federal lands, or made on tribal lands are not subject to Prop 12. 
• In the definition of “Flavoring,” clarifies that the reference to substances listed in 21 CFR Part 184 applies only to “substances with a use described as a flavoring, flavoring agent, or flavoring enhancer.” 

     Marking and Labeling Requirements

• Changes the required marking on shipping and title documents to:
  • For shell eggs and liquid eggs: “Egg CA Prop 12 Compliant.”
  • For whole veal meat: “Veal CA Prop 12 Compliant.”
  • For whole pork meat: “Pork CA Prop 12 Compliant.”
• Eliminates the proposed requirement to include a Prop 12 statement on cartons of shell eggs.
• For covered products not destined for commercial sale in California, shortened the required statement on shipping documents to “For Export,” “For Transport,” (applies to shell or liquid eggs), “For Transshipment” (applies to whole veal meat and whole pork meat), or “Not Prop 12 Compliant.”
• For covered products destined for further processing at an establishment inspected by the United States Department of Agriculture’s Food Safety and Inspection Service (FSIS), the shipping documents must be marked “Only for use at [identify the establishment number]”. The establishment number must include the prefix “G” or “M” (depending on whether it’s an egg products plant or a meat processing establishment).

     Minimum Confinement Requirements

• Eliminates specific enclosure requirements that would have applied prior to January 1, 2022 (e.g., the requirement that egg-laying hens be provided a minimum of 144 square inches of usable floor space) under the rationale that the regulations will not be finalized before January 1, 2022.
• Adds an exemption to the minimum confinement requirements for breeding pigs during the five-day period prior to the breeding pig’s expected date of giving birth and for any day that the breeding pig is nursing piglets.

     Effective Dates

• Pushes back by one year the effective dates for distributor registration and third-party certification:
  • The effective date for distributor registration would be pushed back to January 1, 2023.
  • Parties would be able to self-certify compliance with the requirements (instead of needing a third-party certification) through the end of 2023.  Starting January 1, 2024, third-party certifications would be required.
• The Updated Proposed Regulations do not change the January 1, 2022, effective date for the 24-square foot minimum enclose size for breeding pigs.

     Enforcement and Related Issues

• Removes references to “other enforcement officers” and clarifies through explanatory language that CDFA officers will be the only state officials charged with enforcing the requirements.
• Establishes a formal process for appealing adverse determinations.
• Requires that appeals of certification decisions be made within 30 days.

California says that pork currently in cold storage can continue to be sold after Dec. 31. NPPC says meat processors are evaluating their options.

Impacts. “Ultimately, it’s going to be California consumers who pay the price,” said Rachel Michelin, president of the California Retailers Association. “Either they’re not going to be able to get the product, or they’re going to be paying a lot more for it.” But proponents of the initiative note that major companies including Perdue Farms have indicated they will be “Prop 12 ready.” The California Department of Food and Agriculture estimates that uknder the new law, annual food costs could rise about $50 for each resident, with only 10% of the increase attributed to pork or veal expenses.

Sen. Chuck Grassley (R-Iowa) commented on the topic with the following Tweets:

     “Even tho California is trying to take Iowa’s fine pork away from consumers w their war on breakfast/prop12 join me in celebrating Natl Bacon Day 2day /Iowa is number 1 pork state in the country & we are proud of our quality/delicious products”

     “Iowa pork won’t b allowed to enter California if Supreme Court doesn’t strike down CA prop 12 law If justices don’t act congress must step up & regulate interstate commerce my EATS bill wld fix Do Californians realize pork prices are abt 2go up even higher just 4 their state??”

Court battles past and ahead. Pork producers and retailers have sued to block Proposition 12, which they argue is an extraterritorial regulation that violates the Supreme Court’s dormant Commerce Clause doctrine. The court has repeatedly held that a state may not directly regulate commerce conducted entirely in another state even if it has cross-border “effects.” In late July, the U.S. Ninth Circuit Court of Appeals ruled against a challenge to Prop 12 from the NPPC and Farm Bureau. The groups are now petitioning the U.S. Supreme Court to hear their case. Sources note the petition by NPPC and Farm Bureau is scheduled for a Supreme Court conference on January 7.  But that is also the day the Supreme Court is having oral arguments in the vaccine mandate case. “There is a high likelihood that they will have an initial discussion in conference on the 7th, then wait until the 14th to make a final decision on taking the case or not. If they do that, we would find out likely at about 9:30 am ET on Tuesday the 18th," a contact detailed. “The court isn’t deciding the case, they are merely deciding whether to take the case up.”

Meanwhile, restaurants, grocery stores and industry groups in California are suing the state to block the farm animal welfare law. The lawsuit, filed in California Superior Court in Sacramento, says that a “disconnect” between the bill approved by voters three years ago and the way the state is carrying it out will cause compliance chaos for all affected industries, especially the pork supply chain, which it says will face “substantial disruptions,” potentially including an abrupt stop to pork sales. The plaintiffs, including the California Grocers Association and the California Restaurant Association, are calling for a 28-month postponement to begin once final regulations are adopted. In Iowa, a federal judge dismissed a lawsuit in August that was filed by pork companies in the state challenging the proposition’s regulation of out-of-state businesses.

In Massachusetts, voters adopted a ballot measure on livestock enclosures in 2016. When some state lawmakers realized the law might imperil Massachusetts's food economy during a time of already rampant food inflation, just days before the law was set to take effect, they were forced to amend it. "Without legislative action, eggs born of hens that have less than 1.5 square feet of space could not be sold in the state," the Boston Globe reported (link) last week. "It's a standard industry leaders warn is strict enough to effectively destroy the market: Up to 90% of the eggs currently being supplied to Massachusetts will disappear from shelves, they said, unless the Legislature changed the standard slated to go in effect in January." The state’s lawmakers ultimately agreed on a 7½-month delay, meaning the requirements on pork will phase in on Aug. 15. Besides delaying the initiative’s implementation, the compromise measure requires the Massachusetts Department of Agricultural Resources to write rules and regulations for the law, in consultation with the state’s attorney general — who originally was given authority — within six months. The bill passed recently requires just 1 square foot per bird in a “multi-tier aviary,” which would allow hens room to move vertically but require less floor space. It also would mandate that cage-free hen houses feature “enrichments that allow [hens] to exhibit natural behaviors,” including scratch areas, perches, nest boxes, and dust-bathing areas. (The rest of the new standards for eggs and veal still took effect Jan. 1.) “I want the pork industry to know, in no uncertain terms, that there will be no further extensions for them in Massachusetts,” Lewis said. “They must come into compliance with Massachusetts law . . . if they wish to continue selling their products to our consumers,” said state Sen. Jason M. Lewis, a Winchester Democrat and the chamber’s lead negotiator on the deal.