Cost of Regulatory Compliance More Than Triples in Six-Year Period

Brian German Agri-Business, Regulation

A study tracking regulatory compliance costs in California was recently released, with striking findings. Researchers looked at data from 22 different farms of various sizes in the San Joaquin Valley between 2012 and 2018. During that timeframe, regulatory costs increased by 265 percent. Professor of Agribusiness at Cal Poly San Luis Obispo and co-author of the report, Lynn Hamilton said several factors contributed to the significant increase.

Regulatory Compliance Costs

“Most notably the Food Safety Modernization Act, a number of labor-related policies such as the Affordable Care Act, overtime laws, different reporting requirements…then air quality emissions. The cost of that had also increased,” Hamilton explained. “There would be another step up if we went back and redid that study even now, even just a couple of years later. Because some of these additional requirements with respect to groundwater allocation and also water quality have now been further phased in.”

Hamilton noted that the timing of the study only covered the very beginning of the phase-in of the Sustainable Groundwater Management Act. Costs have likely increased since then as the rule continues to be further implemented. Farmers’ regulatory compliance costs were impacted differently for different crop types. While some regulations affected the entire agricultural industry, the degree to which they were impacted varied between farming operations. One particular aspect of the study produced results that were contrary to previous findings. Small farms were no longer the most negatively impacted by increasing regulations.

“Some of these new regulations really hit the larger growers at a much higher level. We saw that large growers this time had a much higher cost of regulatory compliance on a per-acre basis,” said Hamilton. “We were surprised by that. We had seen in our initial study in 2012 that small farmers actually bore a higher burden of regulatory costs on a per-acre basis.”

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Brian German

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Ag News Director, AgNet West