Whether you are tired of hearing about Proposition 12 or not, the pressures aren’t going away. Experts agree it’s a sign of many more challenges of this kind coming our way. California’s animal welfare regulation Proposition 12 (Prop 12), if enacted on Jan. 1, 2022, will force pork producers to change their practices, moving from science-based swine production to swine production driven by consumer perceptions.
During a recent Farm Journal’s PORK’s webinar, Hyatt Frobose of Gestal, Christine McCracken of Rabobank and William J. Friedman of EarthClaims LLC, weighed in on Prop 12 from an economic, production and compliance perspective. You can watch the webinar on demand here.
Why is Prop 12 So Important?
Forty million people call California home, representing 12% of the total U.S. population and a huge market for pork.
“Of that 12%, they average a higher level of pork intake per person than the rest of the country,” Frobose said.
Despite this large population, there are only 9,000 sows in California, representing 1% of the total U.S. sow herd. California must source pork from other states, which is why this issue extends far beyond the state in which it will be implemented.
“These standards in Prop 12 are currently only met by less than 4% of U.S. sow farms that we know of that are currently compliant,” Frobose said. “However, I don’t think it’s quite that simple. We need to remember that of the 4% of farms that are currently compliant, many of those are already going to other target markets that may or may not be in California.”
How Will it Be Enforced?
Is compliance the chicken or the egg? The enforcement of Prop 12 compliance is going to be an important part of this equation, Frobose said. The California Department of Food and Agriculture (CDFA) shared an early draft of potential rules in July 2020. Unfortunately, the final regulation has not been solidified.
“I certainly am doing my best to design facilities that are going to be compliant,” Frobose said. “But there are a lot of questions out there on whether this is going to be done by the state of California. Is it going to be done by internal auditors within companies and production systems? Or is it going to be outsourced to third-party verification systems? How often will this enforcement occur? What if an audit finds a non-compliance event?”
Some of the standards in Prop 12 bring in some gray areas that are tough to interpret. Friedman has tried several cases in California and has extensive experience in the “certified organic” market. He said one of the challenges with California’s law is that a sale of non-compliant product is a criminal offense. The penalty is a $1,000 fine and up to 180 days in prison.
Because prosecutors can consider each sale a separate offense that could mean each package of pork is a new offense. “You can see how it could scale up and become a real problem,” Friedman said.
The most concerning issue, he said, is the second part in which an unlawful sale is considered an unfair business practice. This allows any person affected by that sale to bring a case claiming that they’ve been victimized by an unfair business practice.
“This kind of provision is often the source of litigation in the state of California, because lawyers will bring cases against companies, even though a prosecutor has not brought a criminal case. In fact, an unfair business practice may be alleged even if CDFA has not undertaken an enforcement action. Plaintiffs’ attorneys in possession of evidence that a source was out of compliance can bring an unfair trade practices claim entitling a plaintiff to receive triple damages,” he added.
The good news is this law has a provision that creates a good faith defense, otherwise known as a “safe harbor.” This means if you comply with this section, then you have a defense to a claim that you sold a substandard product, Friedman explained.
“What kind of verification would qualify you for the safe harbor? California clearly intends that it’d be a third-party certificate, or a certificate issued by a third party that verified compliance with the producing operation,” Friedman said.
The precise boundaries of “certification” will be made by CDFA. He noted that California will want to implement this law by third party certifying agents that it accredits. After Jan.1, 2023, Friedman said everybody in the supply chain will need to hold a valid certification, whatever California ultimately decides that to mean.
Source: NPPC’s Food and Ag Vision
The Floodgate is Open
Efforts are underway to overturn Prop 12 and delay its implementation. Dallas Hockman, vice president of industry relations for the National Pork Producers Council (NPPC), recently shared how data on conversations between prominent figures in the food and agriculture industry (see chart above) shows that attention to Prop 12 follows the measure’s legal standing:
1. Nov. 6, 2018: California voters approve Prop 12. Prior to election day, interest groups raise awareness of the ballot initiative. Afterward, industry examines potential impact.
2. Oct. 4, 2019: North American Meat Institute (The Meat Institute) files a lawsuit and requests that the law be temporarily suspended for pork and veal producers.
3. Dec. 6, 2019: NPPC and American Farm Bureau Federation (AFBF) file suit against the state of California.
4. Mar. 6, 2020: 15 states support NPPC and AFBF lawsuit.
5. Oct. 15, 2020: Ninth Circuit Court of Appeals rejects The Meat Institute’s appeal of the earlier lawsuit.
6. Jan. 14, 2021: NPPC and AFBF submit appeal to Ninth Circuit Court of Appeals after original lawsuit was dismissed.
7. Feb. 16, 2021: The Meat Institute petitions Supreme Court to review its case.
8. Mar. 31, 2021: 20 states support The Meat Institute’s petition.
The lower courts have rejected the challenges so far that have reached the decision stage, Friedman explained. He cautioned producers that the Ninth Circuit is often the slowest circuit court in the U.S.
“It would be unsurprising if that decision took more than a year and up to two and a half years. I wouldn’t expect anything prompt to happen out of the court challenges,” Friedman said. “I’ll also say these are difficult cases to win.
“However, the way the pork industry is organized, the segmentation, lack of traceability for each individual animal in many cases, the fact that animals will be processed in different parts and go to different places, this is going to be very difficult to manage. I think that will give the court some real pause as to whether this is the kind of law that the Federal Constitution would countenance,” he said.
Regardless of how that turns out, the floodgate has been opened. The pork industry is seeing a trend toward more regulations, McCracken said.
“There are several states that are waiting to see what happens in California with these challenges,” she added. “I think bigger picture, we have to look beyond our housing. What we’re hearing from the global market is that consumers are driving the push toward what they perceive are more sustainable production practices, whether that is animal welfare, antibiotic use or how we raise our animals and many of these regulations are not supported by science.
“So, the legal pressure isn’t just coming from California, it is coming from our export partners, too – and they make up almost 30% of our sales volumes so it matters,” she said. “There is a lot on the table.”
This is a learning period for the industry as producers seek to understand how to design their operations to maintain the productivity they expect and the profitability they need while optimizing animal welfare and compliance.
“Communication is key,” McCracken said. “Knowing your costs and communicating where the obstacles are with your packer and trying to get paid for these changes is critical. But also, communicate with your association and make sure you’re aware of what policy changes might be coming down the road so you can build in some flexibility and be ready for future changes when they come.”
Frobose said he is working with quite a few farms, both new and retrofit, that are making a serious effort to be compliant for Prop 12.
“I think we’re going to all learn a lot and hopefully we can avoid any major pitfalls,” Frobose said. “We’ve adapted a lot in the last 30 or 40 years. It wasn’t that long ago that sows were all still housed outside. The fact that we’ve made the evolutions we have in a few decades shows we’re going to be able to face these challenges and still raise a high-quality pork product successfully, even in the coming years.”
More resources are available here from the National Pork Producers Council.
More from Farm Journal’s PORK:
On-Demand Webinar: Proposition 12: Where Do We Go From Here?
20 States Back Challenge to the Constitutionality of California’s Prop 12
California’s Proposition 12 Would Cost U.S. Pork Industry Billions
