Grant-Funded Report December 15, 2018.
Regulatory pressure is a source of increasing concern to the California agricultural industry. In the decade since 2006, new rules at both the state and federal levels have imposed significantly higher regulatory burdens on growers, specifically with respect to food safety, water quality, labor wages, air quality; and worker health and safety. Additional regulations are in process as the Sustainable Groundwater Management Act is developed at the local levels for implementation in 2022, and minimum wage and overtime laws for farmworkers are phased in, also by 2022.
Previous studies regarding the regulatory environment in California have quantified the total cost of regulation on the state’s agricultural producers. The goal of this project was to update a 2006 case study that documented the regulatory costs on a commercial-scale head lettuce grower in the Salinas Valley. The same grower was willing to cooperate on this study, and we used 2017 as the current year, primarily because it was the most recently completed full production year.
In the 2006 study, the cooperating lettuce grower reported regulatory costs totaling $109.16 per acre or 1.26% of total production costs. Lettuce production costs in 2006 were $8,793 per acre. Workers’ compensation was by far the highest regulatory cost for the California producer, totaling almost $59 per acre, followed by pesticide regulations that totaled nearly $23 per acre. Assessments per carton from lettuce marketing orders comprised nearly $20 per acre. Other regulatory costs included water quality, food safety, worker education and training.
However, by 2017, the regulatory landscape had significantly changed, precipitated by a 2006 E. coli outbreak in spinach in the Salinas Valley (that occurred after the 2006 data was collected) that altered the landscape for food safety compliance. New environmental and worker wage and safety laws were also imposed in the ensuing years. The 2017 reported regulatory costs were $977.30 per acre, or 8.90% of total production costs. Total production costs in 2017 were $10,977 per acre for this grower. Workers’ compensation was again the highest cost of regulatory compliance and had risen to $336 per acre. Labor wage regulations comprised another $189 per acre, and food safety compliance followed closely behind at $181 per acre. Affordable Care Act requirements added $141 per acre, while pesticide regulatory compliance totaled over $35 per acre. Other regulatory compliance costs totaled between $5.50 and $28 per acre.
The results of this case study show that, for this lettuce grower, production costs have increased by 24.8% from 2006 to 2017, but the costs of regulatory compliance have risen by 795%. A summary of the most notable changes in regulations from 2006 to 2017 are listed on the following pages.
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