Will the Supreme Court say farewell to California Farm Animal Welfare rules?

Originally published by the Michigan Farm Bureau in Michigan Farm News

The North American Meat Institute (NAMI) filed Feb. 26 a petition with the U.S. Supreme Court in its quest to overthrow California Proposition 12, which imposes minimum housing conditions for animals and animal products produced and consumed in the State.

NAMI argues that Proposition 12 violates the Commerce Clause of the U.S. constitution because it requires out-of-state farmers to restructure their facilities to meet animal-confinement standards dictated by California.

By doing so, NAMI said California is inappropriately trying to extend its regulatory power beyond its borders.

I rate NAMI’s chances at overthrowing California Proposition 12 as highly unlikely even considering the recent rightward shift in the U.S. Supreme Court. Previous litigative efforts to suppress California Proposition 2 — which essentially imposed that all eggs sold in California be produced in cage-free systems — have been unsuccessful.

In 2014, for example, the state governments of Missouri, Nebraska, Oklahoma, Alabama, Kentucky, and Iowa filed a complaint in California District Court attempting to block implementation of Proposition 2 confinement standards but were dismissed for lack of standing. In essence, the court ruled that state attorneys general were not egg farmers and thus were ineligible to bring this lawsuit.

Setting aside the issue of legal standing, opponents to NAMI’s case typically argue that disallowing state-level farm animal welfare regulation would be a “slippery slope.” This is a common legal argument meaning — if the Supreme Court were to hold that California Proposition 12 was a violation of the Commerce Clause — it would call into question the constitutionality of a number of other common state regulations.

But here’s the thing — Proposition 12 definitely does impact Interstate Commerce. In the aftermath of California Proposition 12, which (effectively) imposed that eggs sold in California be produced in cage-free systems, the share of U.S. egg farmers using cage free systems went from less than 5% of national production to around 25% today.

In a recent paper forthcoming in the American Journal of Agricultural Economics, some colleagues and I showed Proposition 2 had widespread effects across the U.S. National prices for a dozen eggs are 7 to 10 cents higher as a result of the policy. California hen housing requirements cost U.S. egg consumers almost $2.7 billion. Most of these costs ($1.98 billion) were borne out of state.

Effectively, this means voters in Los Angeles and San Francisco are imposing their morals on farmers and consumers across the Midwest. Regulation is not the only tool for people who value animal welfare. Even without regulation, consumers in L.A. and elsewhere could still signal their support for animal welfare with their wallets at the grocery store rather than their ballots. Recent research has shown they are generally unwilling to do so.

This is not just a philosophical issue. By mandating animal welfare requirements rather than allowing the market to determine the optimal level of animal welfare can also exacerbate other economic problems in the food system.

The first of these problems is poverty and food insecurity. An increase in egg prices (in the case of California Proposition 2) or pork and veal prices (in the case of California Proposition 12) has important implications for food security for the poor. All these products represent critical sources of animal-sourced proteins.

Readers will recall the empty shelves and skyrocketing prices for staple products amid never-before-seen spikes in unemployment rates at this time last year. In another recent paper with Trey Malone and Jayson Lusk that is forthcoming in Food Policy, we find that the pandemic reduced price premiums for animal-welfare product attributes.

These premiums did not fully recover following the return to more “normal” price dynamics, possibly signaling that willingness-to-pay for animal welfare have fallen as consumers seek to meet basic needs during the pandemic. By removing the lower-priced, less-welfare-friendly options from grocery store shelves, policymakers exacerbate consumer-side crises like the ones we saw at this time last year.

Mandatory farm animal enclosure requirements can also exacerbate issues of industry concentration in the food system. Antitrust lawsuits finding and alleging anticompetitive behavior are becoming more frequent (e.g., broilers, tuna, pork, beef, and turkey industries are all currently defending antitrust litigation).

In addition, the COVID-19 pandemic has raised serious concerns about concentration in the food supply as it leads to few points of failure. At the Big Ag & Antitrust Conference at Yale Law School in January, Daniel Scheitrum and I discussed that farm animal enclosure regulations can and have lead to increased farm-level concentration in affected industries by increasing farm-gate fixed costs.

We also used industry data to show that Proposition 2 did increase market concentration in the California egg industry following implementation.

Of course, California is not the only state imposing farm animal welfare regulations. In the last two decades, 19 bills and ballot initiatives involving farm animal welfare have been considered in 12 states.

These regulations negatively impact poverty and industry concentration, and — as discussed above — people who value animal welfare can readily show their support in the grocery store instead of through law.

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