Uncertainty Ahead as Prop 12 Takes Effect

California’s Prop 12 goes into effect with the new year on January 1. It becomes California state law during a time of already great uncertainty in the pork market. American Farm Bureau Federation Economist Bernt Nelson talks about the current pork market conditions.

“We’ve got some bearish fundamentals going on in the pork market. We just had USDA’s Quarterly Hogs and Pigs Report released. We found out that we’ve still got quite a few hogs in the inventory. The breeding inventory was up three percent from this time last year, so what this means is we have more hogs in the market than we have demand.”

Nelson adds that California’s Proposition 12 is about to throw another wrench into the market.

“California possesses about 13 percent of the demand for U.S. pork, and went Prop 12 goes into effect, we lose that 13 percent of demand from the conventional marketplace. Now that we’re facing a decreased inventory in the beef market, that leaves us asking when will consumer demand start to pick up for pork products, or will they, as pork is a very close substitute to our beef prices.”

He says there’s still a lot of uncertainty about how the market will adjust.

“I don’t know that there is a lot to be done with regard to Prop 12. The fact that it takes effect on January 1 leaves so many people asking questions and very little to do to prepare for it. When this takes place, the only pork that will be allowed for sale in that California market will have to be compliant with Prop 12, so that automatically removes many of our conventional producers from that marketplace. And so, until we see some increased demand domestically and continued demand in our export markets, we’re going to be at the mercy of whatever comes into play here.”