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Prop 12 may create pork shortage in California

National Pork Board NHF-NPB-Pork-Meat Case-1540.jpg
Economist details impacts to consumers when most of nation’s pork becomes illegal to sell in state.

California economist and former Secretary of California Technology, Trade and Commerce Agency Lon Hatamiya has released a white paper detailing the impacts Proposition 12 may have on California consumers – exploring pork price changes against an anticipated 50% reduction of pork supply, as estimated by independent market expert Rabobank.

“Market access restrictions from Proposition 12 will further limit available supply into California, thereby driving up pork prices for all consumers,” said Hatamiya. “The negative financial burden falls largely on the diverse ethnic consumers and communities that make up California, with pork being an important source of protein for African American, Asian American, and Hispanic households, businesses, and restaurants.”

With an unworkable implementation timeline of Proposition 12, Hatamiya analyzed data from a pork pricing study conducted by Kansas State researcher Glynn Tonsor and Purdue researcher Jayson Lusk. The Tonsor-Lusk research sought to determine how sensitive consumer pork purchasing behavior is to price changes for six pork products (loin, ribs, shoulder, breakfast sausage, dinner sausage, and bacon).

Key conclusions from the Hatamiya white paper include:

  • Consumers will have less to spend on other items if they are required to spend more on pork, also known as “consumer welfare.” If a state passes a law that excludes a large volume of pork production entering the market (Prop 12 as an example), this will reduce availability to consumers – driving up price due to the lower availability of supply. For example, a 50% reduction in available bacon would result in 60% higher bacon prices in the Los Angeles market; a 50% reduction in available pork loin would result in 42% higher pork loin prices.
  • When facing higher retail prices, consumers will buy a lower volume of impacted products at a higher price – clearly resulting in economic harm and impacting consumer welfare (meaning that consumers will have less to spend on other items, such as food, rent, utilities, etc.) Specifically, a 50% retail pork price increase would result in consumer loss of $224.5 million annually in Los Angeles; similarly, a $47.5 million consumer loss in Sacramento; $46.5 million consumer loss in San Diego; and $84.5 million consumer loss in San Francisco/Oakland.

“The hasty implementation of Proposition 12 greatly impacts the entire food supply chain – from farmers and food processors to retailers, grocers, restaurants and consumers,” said California Retailers Association President Rachel Michelin. “It will create food insecurity and increase food prices on small businesses and families who cannot afford it.”

California Hispanic Chambers of Commerce President & CEO Julian Canete, commented, “Imagine going to the grocery store and finding the price of bacon, pork chops or ham has skyrocketed. Or you’re ordering carry out from a Latino or Asian restaurant and your favorite pork dish has been removed from the menu. These scenarios are a possibility in California with the pending implementation of Proposition 12.”

Hatamiya was commissioned by the Food Equity Alliance – a statewide coalition of California retailers and grocery stores, restaurants, business organizations, food processors, and food equity supporters calling on Governor Newsom and state leaders to fend off the potential pork shortage by delaying the implementation of Proposition 12. The Hatamiya white paper can be found here.

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