Lower income consumers in California could find it harder to find pork and they may find themselves paying more, starting Jan. 1.
Lon Hatamiya, President and CEO of The Hatamiya Group, joined Chip Flory on AgriTalk to discuss Prop 12 and its potential effect on pork producers and consumers.
“I think the metropolitan area of Los Angeles is probably the one of the top pork-consuming areas in the country,” Hatamiya says. “And based upon a number of different studies, it looks like about almost 99% of pork consumed in California comes from out of the state.”
That’s why Prop 12 has big implications and big impacts on pork producers well beyond the borders of California. Hatamiya says a recent report from Rabobank revealed Prop 12 could potentially cut the pork supply by half, driving up prices.
“That’s part of the analysis that I completed just this past month for the Food Equity Alliance in California, which is a statewide coalition of California retailers and grocery stores, restaurants, business organizations, food processors and community consumers who are concerned about the lack of a very key protein source for many communities across the state of California. And all of us who are consumers should be concerned about this, because it will drive up the price in a huge way across the state.”
Hatamiya says part of the issue with governing by proposition in California is the law of unintended consequences.
“The economic impacts were not fully considered when this was on the ballot. And if consumers truly knew what the impact would be upon their pocketbooks, they might have thought otherwise,” he says.
California is one of the most diverse states in the country in terms of ethnic communities, Hatamiya says.
“If you include the Hispanic, African American, the Asian, and Pacific Islander communities, together we make up a majority of the population in the state of California,” he says. “Pork is one of the primary protein sources for those communities. And the greatest financial burden falls upon many of these communities that potentially are going to be very negatively impacted.”
Bracing for the Economic Impact
Hatamiya, a California economist and former Secretary of California Technology, Trade and Commerce Agency, recently released a white paper on the impacts of Proposition 12 on California consumers.
“I relied upon a study from experts, Dr. Glynn Tonsor and Dr. Jayson Lusk, experts on pork pricing and protein production across the country. And they did an analysis that examined the sensitivity of pork pricing changes on consumers within 51 major markets across the United States,” he says.
When you talk about consumer welfare, the community is spending a certain amount of their consumer dollars on an important aspect of their diet, which is pork, Hatamiya says. And any kind of major shock to that could have a major impact upon their ability not only to buy pork into the future, but also their ability to pay for other things.
“If consumers decided to continue to buy pork at a higher price, let’s say 50-60% higher than they were currently paying, they’re going to have that much less to pay for their rent, for their for transportation, for utilities, you name it. So there’s a broader impact economic impact upon our communities and just the higher price of pork.”
Taking the Rabobank number of a 50% pork price increase based on the implementation of Prop 12, consumer loss could be upwards over $225 million annually just in Los Angeles. There’s another potentially $50 million loss in Sacramento, a similar loss in San Diego and about $85 million from the San Francisco Bay area, he says.
“That’s a major impact upon those areas, and not only on the pocketbooks of our consumers, but certainly will impact other components of the economy. And that’s why there’s a major spill-over effect that this has,” he says. “I took a look at what the current bacon prices are in L.A., and they’re currently a little under $9 a pound. If this proposition goes in effect and the potential reduction available pork is what we anticipated to be, bacon prices could go up to almost $14.34 a pound. Similarly, the pork loin prices are about $5.99 a pound. That could go up to $8.50 a pound. That’s a drastic increase.”
Listen to the whole conversation here:
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Pork Industry Braces for Catastrophic Costs to Implement Proposition 12
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