California residents this week voted overwhelmingly in favor of Proposition 2 (Prop. 2), an animal welfare measure banning the use of some crates for hens, pregnant pigs and veal calves that do not allow the animals to turn around, lie down or extend their limbs. In addition, the law will require farmers to build pens and cages allowing full range of motion in an effort to eliminate high-density battery cages and reduce Salmonella outbreaks. Prop. 2, which takes effect in 2015, also levies fines of $1,000 or six months in jail for violations.

Because most of the state’s pork and veal producers have already prohibited confined cages, some agricultural economists expect Prop. 2 to have a disproportionate impact on the $323-million egg industry. The industry-backed California for Safe Food group spent $8.5 million to oppose the measure, as egg farmers expressed concern that the cost of retrofitting their operations will drive them out of business or out of California. Ryan Armstrong, the owner of a medium-sized egg farm in Center Valley, estimated that it would cost $30 per bird to update his hen housing. “If I ask a banker today for $12 million, he would say don’t bother filling out the application,” he told reporters.

The Humane Society of the United States, however, has called this argument “absurd,” contending that farmers “are going to have to adjust
their production strategies to accommodate this demand.” Prop. 2 proponents also spent approximately $8.5 million in support of the measure, which passed by a 2-to-1 margin. The Humane Society now has plans to take its campaign to other states. “It will force a lot of industrial farmers in other states to sit down and negotiate a phase-out because they don’t want to go through what the egg industry went through in this state,” said the group’s president, Wayne Pacelle. “The egg industry spent eight-and-a-half million bucks and they got a drubbing.”

Meanwhile, Daniel Sumner with the University of California, Davis Agricultural Issues Center recently published a study finding that the cost of eggs from both caged and free-range hens will not increase for the consumer, partly because California imports one-third of its shelled eggs from out-of-state producers. He nevertheless admitted that farmers will face steep challenges adapting to the new rules. “The alternative is to lose a million dollars a year,” Sumner was quoted as saying. “Growing chickens isn’t like growing wine grapes. It’s not a romantic business. It doesn’t attract a lot of movie stars and Silicon Valley entrepreneurs.” See Capital Press, November 4, 2008; Greenwire, November 5, 2008; The Los Angeles Times, November 6, 2008.

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For decades, manufacturers, distributors and retailers at every link in the food chain have come to Shook, Hardy & Bacon to partner with a legal team that understands the issues they face in today's evolving food production industry. Shook attorneys work with some of the world's largest food, beverage and agribusiness companies to establish preventative measures, conduct internal audits, develop public relations strategies, and advance tort reform initiatives.

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