The road to pork product serfdom

There are interesting developments afoot in the world of agriculture and livestock, as recently recounted in the pages of the New York Times. According to reporter Julie Creswell, the “normally orderly” pork industry has been thrown into upheaval, as hog farmers in the Midwest, major pork processors, and California businesses have reacted to changing farm regulations in recent months.

Earlier this year, the Supreme Court upheld a California law banning the sale of certain meat products made from pigs raised in small gestation pens, an anti-animal cruelty measure. That law was going to be implemented starting July 1 of this year, but officials in the Golden State put off full enforcement of the law until early next year.

While the extra time was seen as a pro-business concession to make compliance easier, the whiplash in business planning has produced problems of its own. Pederson’s Natural Farms in Texas, for example, (which produces hogs in line with the new law) was getting so many orders from California they were planning to expand production. But now that the deadline has been extended, many of those new orders were suddenly cancelled.

On top of that, uncertainty over how the law will actually be enforced long-term has apparently caused some out-of-state suppliers to take a pass on selling in California at all, which will likely push up prices on bacon and sausage for customers even more. In order to be able to sell to California customers, many pork producers would have to make expensive long-term investments in how they raise their hogs that would take several years to recoup, chilling enthusiasm for cross-border compliance. 

Raising the issue to the national level, several members of the US Senate from largely agricultural Midwestern states recently introduced the Ending Agricultural Trade Suppression (EATS) Act, which would limit the ability of states to regulate agriculture in other states – a bill aimed directly at the California legislation. In early August, attorneys general from several states, including Texas, New Hampshire and Utah, signed a letter urging Congress to pass the EATS Act.

But that puts pork producers in an awkward bind. If they make expensive changes to accommodate demand in California only to have Congress pass the EATS Act, they will likely have flushed a lot of money down the drain. But if they hold off and the bill doesn’t pass, they could lose out on contracts that would have been profitable.

Regardless of what you think of the underlying question of how many square feet a hog or chicken needs to thrive, this confusing back-and-forth is an example of how government economic intervention often produce inefficient, unintended side effects. Even the attempts to make compliance easier on farmers has thrown off planning and long-term ordering in a way that generated even more costs and uncertainty.

Producers who raised their animals in larger pens could have marketed and labeled their meat in a way that reflected that, allowing consumers who value that aspect of production to pay slightly more for it. But trying to regulate it nationwide from one state capital has created such a mess that producers still aren’t sure what the law and industry prices are going to look like even five years after it was originally on the ballot. 

We also covered this topic in Episode 37 of the Free the Economy podcast, starting at 8:32.