Last May, the Supreme Court made hogs happier. By sustaining California’s animal welfare law, they vastly expanded the size of a hog’s home. Whereas the current gestation standard is 7 feet by 2 feet, California mandates a 24-foot minimum.
Although the jurisdiction of California’s Proposition 12 covers hog farmers in the state, its impact is far larger.
Because the law applies to all uncooked pork sold in the state, it does not matter where the pig was born and raised. Starting July 1, if the meat is sold in California, it has to abide by California’s rules. Still though, limiting supply, the industry was waiting for the Supreme Court decision.
So, now that they know, since June, at $2.37 a pound, wholesale pork belly prices used for bacon, nearly tripled:
Our Bottom Line: Supply and Demand
It’s classic supply and demand.
With the new animal welfare requirement, hog farmers would have to design a new environment for their sows. A roomier home means an expensive investment and a cascade of other rising costs. Classic demand and supply, higher production costs shift the supply curve to the left and increase price.
You might wonder why prices shot up during June. As economists, we can say that it was because of future expectations, a demand determinant. Rushing in to buy pre-existing supply, pork producers shifted the demand curve to the right. As a result, both the supply and demand sides elevated equilibrium price:
Not knowing that they were responding to a Supreme Court decision, restaurants will surely reconsider plans to offer “Baconator” specials.
My sources and more: Thanks to my morning WSJ podcast for alerting me to the pork Supreme Court decision. From there, this article had more of the facts as did the SCOTUS blog. And finally, if you still want more, several years ago, econlife looked at a similar situation for California’s chickens and also at gestation crates. Please not that today’s updated post repeats several sentences that we previously published.
As a NY/NJ person, I was fascinated with the pig facts I got from the USDA. This graphic summarizes the life of a pig.