American producers operating smaller farms will have a higher price to pay when it comes to complying with the Food Safety Modernization Act’s (FSMA) Produce Safety Rule (“Produce Rule”), according to a recent United States Department of Agriculture (USDA) Economic Research Service (ERS) report. Compliance costs for the smallest farms are estimated to be as high as seven percent of their annual produce sales, whereas ERS estimates that the largest farms would only pay 0.33 percent of their annual sales.
The estimated costs of compliance with the Produce Rule were calculated based on farm size, location, and commodity. The report, therefore, provides valuable analysis on how compliance costs impact different types and sizes of farms. For more information on which farms must comply with the Produce Rule, the National Sustainable Agriculture Coalition (NSAC) has created a “FSMA flowchart” to explain.
Estimated Compliance Costs
The ERS report provides insight into the annual compliance costs for fully regulated, non-exempt farms based on their size. As compared to the Food and Drug Administration’s (FDA) Regulatory Impact Analysis (RIA), which was required as part of the Produce Rule rule-making process, the ERS report shows an even greater unequal distribution of compliance costs based on farm size.
FDA’s RIA included the following compliance cost estimates:
- Very small farms ($25,000-$250,000 in annual sales): $4,477 per year
- Small farms ($250,001-$500,000 in annual sales): $12,384 per year
- Large farms (over $500,000 in annual sales): $29,545 per year
The new ERS report, which used detailed farm-level data from the 2012 Census of Agriculture, contains different estimates:
- Very small farms: $5,560 per year
- Small farms: $21,136 per year
- Large farms: $29,228 per year
The estimated costs for very small and small farms raises serious concerns about the viability of small produce farms in the context of FSMA implementation. According to the ERS report, very small and small farms face significantly higher compliance costs – 6.04 to 6.77 percent of annual sales, as compared to 0.92 percent for large farms. Smaller farms will be at a competitive disadvantage because of the disproportionate burden of compliance costs.
Even for qualified exempt farms, which must comply with modified requirements under the Produce Rule, the costs can be extreme. For very small qualified exempt farms, the compliance costs are estimated at 2.45 percent of their annual produce sales.
The ERS report also notes that compliance costs differ based on location and commodity. FDA’s RIA did not provide estimates based on region or commodity.
Disproportionately high compliance costs for smaller operations can impact the long-term competitiveness of farms in states where produce is mostly grown by smaller farms.
For example, the highest compliance costs are estimated to be in states where smaller produce operations predominate (e.g., Vermont, Arkansas, Minnesota, Kentucky, Mississippi, Iowa, Alabama, South Dakota, and Alaska). In those states, costs range from 3 percent to 3.82 percent of annual produce sales, respectively. In states where most of the produce is grown by large farms (e.g., Florida and California), the compliance costs average around 1.3 percent.
In analyzing the cost estimates by commodity type, romaine lettuce was found to be lowest at 0.31 percent of annual sales. Among vegetables, squash, chile peppers, and snap beans had the highest estimated costs, ranging from 2.5 percent to 2.99 percent. The highest estimated cost for fruit was for pears at 2.97 percent of annual sales. The fruit with the lowest estimated compliance cost is honeydew at 0.70 percent.
It is clear from the data that larger businesses and farms that grow certain commodities will have an advantage over smaller producers when it comes to the costs of complying with the Produce Rule.
Help Level the Playing Field for Family Farmers
The 2018 Farm Bill is moving into conference – a time when the House and Senate attempt to reconcile the differences in each of their drafts to pass a final, unified bill. This represents an important and timely opportunity to address the regulatory burden family farmers are facing when it comes to compliance with the FSMA produce rule.
Thankfully the Senate Farm Bill includes a new program, the Local Agriculture Market Program (LAMP), which (among other provisions) would provide up to $5.25 million annually for food safety cost-share assistance to family farmers. This assistance would help to offset the cost of on-farm food safety infrastructure upgrades and relevant food safety certification costs. Unfortunately, the House Farm Bill does not include LAMP, or any similar programs or direct investments that would help family farmers manage the costs associated with complying with the FSMA Produce Rule.
NSAC, along with over 300 allied organizations, are calling on the farm bill conference committee to include LAMP in the final farm bill. To join this effort and help to ensure that the 2018 Farm Bill includes direct assistance to family farmers for FSMA Produce Safety Rule compliance, please contact your member of congress and urge them to sign on to the LAMP Dear Colleague letter currently being circulated by Representatives Chellie Pingree (D-ME) and Dan Newhouse (R-WA).
Special Note on the Future of ERS
ERS has consistently published objective research reports like the one covered in this blog post. This critical work, however, is now at risk. Earlier this month, the Trump Administration announced that it planned to move ERS, along with the National Institute of Food and Agriculture, outside of Washington, DC to a yet-to-be-determined location. The Administration also announced that it would move ERS out of the jurisdiction of the Research, Education, and Economics Mission Area and under the jurisdiction of the Office of the Secretary of Agriculture. NSAC is deeply concerned that the physical move of the agencies will isolate them from key colleagues and resources concentrated in the capital, and result in the exodus of staff, including senior-level staff. Moreover, moving ERS into the Office of the Secretary would compromise and politicize the very federal agency responsible for impartial food and agricultural economic analysis. We urge you to contact your member of Congress urgently to oppose the reorganization and relocation. For more information, visit our recent blog post on the issue.