Considering Prop 12 Conversion? Think About These Things First

(National Pork Board and the Pork Checkoff)

Complying with California's Proposition 12 will cost individual hog producers millions. At a time marred by COVID-19 disruptions and high inputs, the decision to become Prop 12 compliant is no small one. According to a University of Minnesota study, the conversion of sow barns to group pens alone would cost the industry between $1.87 billion and $3.24 billion. 

Kent Bang, director of swine lending for Compeer Financial, works with many hog operations across the country and shared his perspective on what it takes to prepare a farm for Prop 12 compliancy during the 2022 Iowa Pork Congress. 

As of Jan. 1, Prop 12 prohibits the sale of pork from hogs born to sows raised in housing that does not comply with California’s highly prescriptive standards. These regulations apply to any uncooked pork sold in the state, whether produced in California or outside its borders. 

Proposition 12 requires that any female pig 6 months old or older kept for breeding purposes be provided at least 24 square feet of floor space and be able to stand up, turn around and stretch their limbs without touching the sides of the enclosure or another animal. There is an exception for farrowing, but it requires sows to be immediately moved back to open pens once the piglets are weaned. During breeding, the proposition only allows confinement of a sow for 6 hours within a 24-hour period and no more than 24 hours in any 30-day period. 

“There are really three ways to go about it that we're seeing,” Bang said. “Reduce the sow herd, reconstruct or reconfigure existing barns, or build new construction.”

He said it’s important to point out that every barn is clearly different. Because of this, there is really no “right” way to go about Prop 12 conversion. 

Reduce the Sow Herd

One option is to simply reduce the sow herd to meet the gestation space needed. This would result in no change in gestation barn size, but Bang said it pencils out to about a 25% reduction of the sow herd and at least 25% reduction in utilization of farrowing space unless increasing weaning age. 

Although there would be no added costs to do this, fixed costs would increase $2.50 per pig. Reducing the sow herd size would increase costs by $11.75 per pig and a reduced biological performance would cost $3 per pig. Some down time would be needed to remodel the pens. 

In the end, Bang estimates this decision would cost about $17 to $18 a pig. 

“Everybody here in this room knows that that's going to be inefficient from a standpoint of utilization of available farrowing, but it may be someone’s best choice,” he said. “Every situation is a little bit different.”

Reconstruct or Reconfigure Existing Barns

The second option, which is a little more common and more cost effective, would be to fully utilize the existing farrowing and add gestation space to the site to meet the 24 square feet of housing regulation, Bang said. 

Using a 2,500-sow farm example, Bang said it would require an additional 33% of gestation facility space. To remodel the existing gestation space and add on, it would cost around $600 a sow, just over $2.1 million. If you figure an average 26 pigs per sow per year (PSY), that would result in 65,000 pigs per year at an additional cost of $4.70 per pig over the life of the equipment. 

“It's fairly expensive to rip the equipment out, dispose of it and put in new equipment. That number is trying to capture all that,” he said. “And any new construction is expensive when adding gestation space.”

He reminds producers this doesn’t factor in biological costs, such as farrowing rate, non-productive days and sow mortality. 

Build New Construction

A third option is to build new construction. With the current high cost of construction, Bang said the costs he’s seeing for typical open pen gestation new construction – not Prop 12 compliant – are scary. He said it’s about $3,000 to $3,300 per sow. Prop 12 compliancy will add $600 to 700 to that number per sow. 

“It’s very expensive to do,” Bang said. “That is a big range, too, but it’s really dependent on GDU, size of farm, filtered or not, design differences, site differences, but that gives you an idea.”

He said while the overall cost is high, the costs per pig on new construction could be the lowest cost financially. But again, he said it requires determining the return on investment and every facility is different. 

Bang estimated using standard farrowing crates and open pen gestation with one or up to six weeks in free access stalls. He said standard gestation ($1,500) versus free access stalls and additional space required ($2,150) results in about a $650 difference. This results in an increased cost of $3.62 per pig (when calculating 26 PSY), if there is no change in production.

“We think free-access stalls are a good way to manage sows from a standpoint of allowing them to get in and to get away from others and the ability to lock them down so that you can breed with an alley pen and have free access behind them,” he said. “My opinion, personally, is what sometimes gets us in trouble is that time period from when a producer weans a sow to when a producer breeds her. That is the most detrimental time for sows to fight. Even one week separation before you move into an open pen is important so that timid sow can get away.”

Most of his clients building something to meet Prop 12 requirements are using free-access stalls for six or seven weeks so they can manage the sow, pregnancy testing, re-cycles, etc., before moving to other open pen gestation. 

“It’s important to remember that the California law as it stands, says gilts over 6months also have to be housed with 24 square feet,” Bang said.

Contracts and Agreements

Bang said there’s been a lot of discussion on Prop 12 contracts and agreements. He recommends producers negotiate contracts in terms of pigs delivered, not years. 

“If I have contracted for five years, what happens if I have a disease issue like PRRS that may cost me three months of production?” Bang asked. “How do I catch up? If that does happen, where do I find pigs that are Prop 12 compliant?”

With investment in long-term assets, contract terms need to be as long as the expected return to cover asset cost, he said.

3 Questions to Ask 

1. Considering the barn age and condition, does it make sense to put significant capital back into it?
Before you begin, take a close look at what is there today. How can you get to 24 square feet with what you currently have? What does that pen design look like? Some barn dimensions lay out better and more efficiently than others. 

“There are lots of variations in what's available and what people are utilizing,” Bang said. “We have clients that are very successful with various kinds of electronic sow feeding (ESF) systems and pen designs. Lots of different configurations can work. Animal husbandry is about people and making that system work.”

2. What is your slat layout like?
Bang said slats have been an interesting sticking point for some of the producers he works with. It’s important to know what is under the solid area before you start tearing up your barn to become Prop 12 compliant. He added it really depends not so much the age of the barn, the quality of the slats, but what was done when that cap was poured.

“We had one client that tore into the barn and started tearing up the concrete when he figured out that nobody laid anything down between the slat and the concrete that was poured on top of it. So, he destroyed the slats under it.” Bang said. “There are lots of considerations from that standpoint.”

3. If you're going to add gestation space, can you get it permitted in your area?
If you plan to add gestation space, make sure you can get it permitted in your area, Bang recommended. Producers should look at the ability to expand an existing permit to accommodate the additional gestation space required (a 25% increase in square footage).

Read more from Farm Journal's PORK:

 

BREAKING: State Court Halts Enforcement of Prop 12, California Must Finalize Rules First

 

Prop 12 Countdown: California Food Industry Leaders Fight Back

Proposition 12: Stop Applying Band-Aids to Proposed Rules, NAMI Says

Proposition 12 Will Create a Burdensome, Bureaucratic Labyrinth, NPPC Says

 

Pork Industry Braces for Catastrophic Costs to Implement Proposition 12

Proposition 12 Pressures Aren’t Going Away

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

Court Upholds California Proposition 12

Delay Implementation of Proposition 12, Food Industry Leaders Urge

 

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