Unfinished Business
The Customer Is Always Right
The Supreme Court recently declared that issuing a legal opinion regarding "what type of pork chops California merchants can sell is not on the list of weighty topics addressed by the U.S. Constitution." The 5-4 decision, written by Justice Neil Gorsuch, upheld California's controversial Proposition 12. In a state like Iowa, where pork production is a $7.7 billion behemoth business, Gorsuch's words must seem a little flippant.
At issue was a 2018 ballot initiative banning the sale of pork products in California unless housing for the female hogs (sows) measures a minimum of 24 square feet of floor space, allowing them to lie down, turn around, and extend their limbs. (Proposition 12 also bars sales of veal and eggs if the confinement space for calves and egg-laying hens fails to meet minimum space requirements.)
Currently gestation crates used by an estimated 72% of hog farmers measure between 14 and 20 square feet (Rabobank Agrifinance) An average sow weighs 450 pounds, and can behave aggressively if housed in a group pen during the breeding cycle.
The American Farm Bureau and the National Pork Producers were granted an injunction to stay the law while their legal team prepared an appeal to the Supreme Court. The plantiffs' legal argument was that Proposition 12 violated the dormant Commerce Clause, which forbids state laws that intentionally discriminate against interstate commerce.
Californians consume 13% of the pork sold in the U.S. The law would apply to California producers as well, but almost 100% of pork sold there is raised in other states, including Iowa, North Carolina, Minnesota, Illinois, and Indiana. Could one state hold the power to regulate pork production in other states, making any violation of its minimum standards a criminal offense and civil violation?
The NPPC and American Farm Bureau also argued that Proposition 12 would raise consumer prices for pork, without any scientific evidence that the law would improve sow welfare. From the producer perspective, they said it would drive small hog farms out of business, leading to more consolidation. They raised fears that because of the aggregate marketing channels used by the industry, all pork may have to meet this standard--regardless of its market destination.
A majority of justices agreed that state officials could not be prevented from enforcing a democratically adopted California law. Attorneys for the State of California and the Humane Society of the U.S. countered that Californians knew that Proposition 12 would raise prices for pork products, and its passage indicated a willingness to bear this cost.
Pork producers outside of California will be on the hook for shouldering the costly burden of retrofitting their facilities, given the NPPC estimate that it would raise production costs by almost 10% or $13 per pig. Estimates of the total industry cost of compliance range from $290 million to $350 million.
However, noncompliant pork producers still can sell to other states, right? The NPPC and American Farm Bureau argued that Proposition 12 may set a precedent. Could this Supreme Court decision result in a patchwork of ever-changing and costly requirements for livestock production?
But California is not the first. A similar law in Massachusetts, called Question 3, is a 2016 ballot initiative banning the sale of pork from hogs born to sows housed in pens that don't comply with its new standards, allowing them to lie down, stand up, fully extend their limbs, and turn around freely. Question 3 has been on hold, pending the Supreme Court decision on California's Proposition 12.
The injunction delaying Proposition 12 is set to end on July 1, although there's plenty of confusion about whether producers need to convert their facilities by that date, retailers need to turn over the product on their shelves, or if Proposition 12 begins to apply to pigs born on that date.
What's next?
Not all pork producers will be equally impacted. For instance, Seaboard Corp, the third largest U.S. hog producer, which operates Seaboard Foods, already had converted a portion of its farm facilities to meet California's requirements. It's prepared to provide limited supplies, beginning on July 1, according to a company spokesperson. Processor Hormel Foods, which sources hogs from Midwest producers as well as its company-owned hog operation in Colorado, also stated that many of its products already are complaint.
At the other end of the spectrum, Niman Ranch, a network of 740 small and independent family farms in the U.S. exceeds the California standards for humane animal treatment. Launched in the early 1970s in California, Niman Ranch established a foothold in Iowa in 1995 among producers willing to supply more labor to produce a value-added product. In 2019, Iowa had 195 Niman Ranch hog producers, and they marketed 116,943 hogs. Niman submitted an Amicus Brief in support of Proposition 12. Its producers use genetic selection and increased space for feed and water to manage the undesirable behaviors of sows in group housing, including aggression.
Niman Ranch is unlikely to ever surpass the volume of pork supplied by vertically integrated hog producers like Smithfield, (owned by China-based WH Group since 2013); Seaboard Foods; Pipestone Management; Iowa Select Farms; or JBS, a subsidiary of a Brazilian company.
What about moderate-size hog producers in the middle? Despite pork production's outsized importance to Iowa agriculture, the 2017 Census of Agriculture tallied only 6,221 Iowa hog producers, or 7.2% of all Iowa farms, according to a 2021 paper by former ISU economist Dave Swenson. Many of them, perhaps a majority, "finish" hogs from feeder pigs supplied by a company. They do not provide care for sows that give birth to piglets.
Producers who remain relatively independent, owning their facilities and sows, are at risk. Will pork processors still buy hogs from noncompliant facilities--or will they be docked? Will packers pay a premium for retrofitting facilities?
Iowa hog farmers lost their independence
Three decades ago, hogs were known as "the mortgage lifter" for family farmers. A farmer raised sows, bred them, farrowed piglets, and fed pigs grain grown on the farm until they reached market weight. In 1991, a survey by Successful Farming revealed that 62% of farmers housed gestating sows in outdoor lots. Following the farm crisis, the ground rules for pork producers began shifting beneath their feet.
Production contracts offered by large meat packers accelerated this change, offering vulnerable farmers a fixed profit, insulating them from market fluctuations. In return, packers acquired "captive supplies." The number of hog farms fell by more than 70% between 1992 and 2004 (hog inventory remained stable) The average hog operation increased from 945 head in 1992 to 2,589 head in 1998 and 4,646 head in 2004.
Next, packing plants began to vertically integrate, an anticompetitive practice in violation of the Packers and Stockyards Act of 1921, which makes it unlawful for a packer to own, feed, or control livestock intended for slaughter. One by one, farm states lost their legal battles.
Of course, gains in efficiency resulted from packer contracts specifying uniform products, and production costs lowered, due to new technology. But the price of hogs at the farm gate dropped significantly, and farmers under contract owned only the facilities--not the hogs. At the same time, structural changes in the industry elevated environmental risks and raised nuisance impacts impacting water quality. Studies have revealed the negative impact of profits leaving the state of Iowa and its rural communities.
Large corporate players continued to use smaller, family farmers as a public relations foil against stricter regulations.
Evolving marketplace
Today a growing segment of consumers are increasingly concerned about how their food is produced. This includes transparency regarding where their food was produced, who produced it, and what practices were employed to produce it.
But it's not the first time that conventional farmers have adapted their practices to changing consumer preferences, including:
·     Leaner pork: Pork often was criticized for its fat content until The other White meat campaign was launched in 1987. Producers focused on genetics, nutrition, and production methods to breed a leaner, protein-rich product.
·     Organic farming emerged in the 1990s and began to surge in the early 2000s, as farmers grew more confident of a consumer market for food produced without chemicals. But some conventional farmers resent the implication that something is wrong with their products.
·     Grass-finished beef. Some producers shifted from the practice of "finishing" beef in feedlots with a high-energy diet of grain to multi-paddock grazing on pasture.
·     Antibiotics. Used to help livestock grow faster and fight illness caused by crowded housing. A 2012 Consumer Reports survey showed a preference for antibiotic-free meat. Today FDA has guidelines for withdrawal of medically important antibiotics.
·     Hormones. Recombinant Bovine Somatotropin (rBST), a genetically modified hormone, was promoted to produce the same volume of milk with fewer cows, but consumer outcry changed the trajectory of this practice.
Other examples abound, including growing edible soybeans and raising vegetables and fruits for farmers' markets. Iowa legislators recently passed a questionable law allowing consumers to purchase raw milk under certain conditions.
Most of these farmer responses affecting qualities or attributes in the product itself are considered niche markets. Conventional pork production doesn't fit the niche market mold. Nevertheless, inroads are being made into encouraging more humane methods of meat production, including:
·     In 2002, Florida passed a ballot measure in its state constitution, prohibiting gestation crates. (Took effect in 2008.)
·     In 2006, Arizona banned both gestation and veal crates. (Phased in by 2012.)
·     In 2008, California's Prop 2 prohibited "battery cages" for egg-laying hens.
Maintaining transparency with consumers is a difficult challenge when animals are housed and raised in increasingly complex systems, often changing hands and locations multiple times.
On the other hand, another large segment of Americans does not lie awake at night, concerning themselves about the humane treatment of the livestock that eventually is slaughtered and sold as products to enjoy on their outdoor grills. They also may be price-sensitive, and appreciate more focus on production efficiencies to lower prices.
During Covid-19, supply chain issues highlighted the importance of building flexibility into the food supply chain. Initiatives like Proposition 12 and Question 3 will test whether the industry will be convinced that marketing different types of meat products is worth the increased costs of segmentation in the assembly line.
Although most consumers are far-removed from first-hand experience with livestock production, animal handling practices and animal welfare measures will continue to be factored into their purchasing decisions.
No doubt there may be more to unfold regarding the future of Proposition 12, including the re-introduction of legislation by Rep. Ashley Hinson (R-IA) that bans state and local governments from imposing standards on the production or manufacture of ag products such as pork, sold over state lines.
Is the customer always right?
"We have a right to choose the type of agriculture we want in this country," I wrote in a 1995 column in Successful Farming. "But family farmers will have to capture the attention of the nonfarm consuming public."
We're close to reaching that tipping point. But is it too late to regain a balance in the marketplace?
The Iowa Writers’ Collaborative
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Hi, Josiah. No, Proposition 12 is only directed at gestation crates. I think there is a consensus that farrowing crates are humane in the sense that they save the lives of piglets. I am not an expert on Niman, but I know its producers do not use gestation crates. Thanks for forwarding the article--I don't know what IFT will make of it! Thanks again for your questions, and your interest!
Great explanation. I believe the pens were about 35 square feet on the farm on which I grew up, so 24 square feet seems very reasonable to me.