At this point, you’ve probably seen enough campaign ads that you don’t need me to tell you that elections are around the corner.
Among several food and agricultural issues up for vote this year across the country is Proposition 12 in California. The official California voter guide has the following information on the initiative:
If this feels like deja vu, you’re right. California votes passed a similar law in 2008 (Prop 2). The new bill (Prop 12) goes further by explicitly specifying a minimum amount of space per farm animal and by requiring cage free production systems for egg laying hens by 2022.
Allison Van Eenennaam, animal scientist at UC Davis, has weighed in with her (critical) thoughts on Prop 12, and she pointed out the irony that the main donor against Prop 12 is an animal advocacy organization that would like the conversion to cage free to happen sooner than is required in this proposition.
I’ve received a few calls from reporters asking my thoughts on potential market impacts of Prop 12. I’ll share them here.
I’ve co-authored two papers on market impacts of the previous Prop 2 and the associated state legislation that went into effect in 2015 (see this paper with Conner Mallally and this one with Trey Malone). The paper with Conner showed a roughly 30% price impact of Prop 2 immediately after it went into place, an effect which fell to about 10% about a year and a half later.
There are reasons to expect Prop 12 to have smaller or larger effects than what we measured for Prop 2.
Why smaller? An increasing share of egg production, nationwide, is coming from cage free production systems (see data here), and if pledges by food retailers to go cage free are upheld, more than three quarters of the industry will be cage free by 2025. Moreover, a number of other states have passed laws to go cage free. Given these apparent trends toward increasing cage free, the effects of Prop 12 per se may be small. That’s not to say that egg prices won’t rise (they will), but that Prop 12 may not be the ultimate proximate cause.
Why larger? Well, retailer pledges may not be upheld and industry conversion to cage free has slowed. Cage free and organic combined are only around 17% of the total laying flock at present. Moreover, our previously estimated price impacts of Prop 2 occurred in a situation where producers did not have to undertake large capital investments. Producers could comply with the space requirements that resulted from Prop 2 by removing a hen or two from a cage. By contrast, Prop 12 will require entirely new housing systems, resulting in significantly higher conversion costs than did Prop 2.
If I was forced to make a guess about the effect size coming from a future study of the impacts of Prop 12 (a future study like the ones I conducted with Conner or Trey), I’d guess something around a 15-25% price increase in retail shell egg prices by mid-2022 relative to the counterfactual of no Prop 12.
There are other impacts of Prop 12 that are getting less attention but could have big impacts. In particular, Prop 12 would prohibit sales of pork from gestation crate systems. Because California relies on the rest of the U.S. for virtually all it’s pork, I could imagine situations in the short run where retailers have difficulty sourcing enough supplies that comply with the new regulation. If this seems far fetched, remember when Chipotle had to stop selling carnitas, and then, for at time, sold the pork dish with supplies that did not meet it’s guidelines? Another potential consequence, noted by Van Eenennaam is that Prop 12 would prevent “scientific and agricultural” research from studying animal behavior in conditions that don’t comply with Prop 12. It’s hard to quantify the impact of the inability to learn about certain research questions, but the impact isn’t zero.