by Roland McReynolds, CFSA Executive Director
The costs to farms of implementing the requirements of the proposed Food Safety Modernization Act (FSMA) Produce Rule will be significant. It takes time and money to carry out the rule’s many testing requirements and documentation mandates. Many farms will have to increase their investments in irrigation, fertilizers, farm equipment, wildlife barriers and buildings. These capital investments typically must be paid for upfront, even though the ‘benefits’ may be spread over multiple years.
Congress anticipated that in some instances the costs of compliance with the rules would exceed any actual benefits in terms of reduced foodborne illness. The law calls for FDA to evaluate those costs and modify the rules to provide sufficient flexibility for farms of all sizes to comply without being subjected to unreasonable burdens. Congress also ordered FDA to study the relationship between the length of a food supply chain and the risk of foodborne illness outbreaks and modify the produce rules to account for the reduced outbreak risk in local food systems.
However, FDA failed to conduct a meaningful analysis of the risks in short food supply chains: The agency didn’t conduct any surveys or research, relying only on a focus group of microbiologists. Unsurprisingly, this shoddy method did not result in any significant modifications of the produce standards applicable to local food chains. The closest the agency comes to an accommodation for local food is to exclude farms with less than $25,000 in food sales from the rule. While a large majority of farms growing produce fall under that income threshold, they account for just 4% of our nation’s fruits and vegetables. And even these small farms could be targeted if FDA decides there is a reason to investigate.
The FDA’s economic impact analysis shows just how dramatically the produce rule will affect the farms that are driving growth in local food. FDA estimates that 40,000 farms will be subject to the rules; approximately 35,000 of those farms have sales less than $500,000. While these 35,000 farms grow just 14% of the produce regulated by FSMA, those farms will incur 41% of the costs of compliance; for the parts of the rule governing water use and record-keeping, those farms’ share of the aggregate cost of compliance skyrockets to 71%. Overall, FDA estimates that these farms will spend an average of 6% of their annual income to meet the rules’ requirements, and according to USDA, these farms average annual net income of just 10% of sales.
Moreover, FDA data shows it will be the first year’s costs that hammer this group of farms hardest, and this impact is obscured by the agency’s calculation of average costs over seven years. FDA calculates economic costs on the basis of a seven-year depreciation cycle, overlooking the fact that depreciation cycles are irrelevant to farmers who do not have sufficient income to write off costs against profits. Even if a small farm earns enough income to consider filing depreciation schedules, it may not actually have the cash on hand to implement a required procedure. For a farm grossing $250,000 or less, the first year’s compliance expenses will amount to 11% of sales—again, according to USDA, these farms average annual net income of just 10% of sales. It is easy to see why former USDA Deputy Secretary Kathleen Merrigan stated it in a recent speech that the rules could ‘destroy some operations.’
The Agency itself predicts that smaller farms will be disadvantaged by the Produce Rule. It projects that some farms will decide the increased costs are not worth shouldering, and may leave the produce business. The Agency also suggests that many farmers will be forced to look for ways to increase their off-farm income. All told, the Agency says, “We expect that the rate of entry of very small and small [farm] businesses will decrease.”
To justify these burdens on farmers, FDA claims dramatic public health savings from reduced foodborne illness from produce as a result of implementing the rules, and here the numbers dissolve into hocus pocus. Extrapolating from the tiny amount of actual data available about foodborne illness attributed to produce, FDA estimates that the rule will avert 1.75 million illnesses and save $1 billion in private and public expenses annually. However, buried in the agency’s analysis is are admissions that those benefits could be overestimated by 30%, and that 25% of the illnesses FDA is attributing to fruits and vegetables are actually from processed ‘fresh-cut’ products that are almost never distributed through local food channels. Add it all up, and the annual benefits could amount to just $450 to $700 million per year—the same amount that it will cost farms to comply with the rule.
So the net benefits of the rule might well be zero, while the costs will go beyond the bottom line of farms in business today: Farms will go out of business, and new farms will not be started. It makes no sense to start farming when the federal government is promising to take more than half the already limited profits. FDA’s rules will reverse the trend of new farmers entering agriculture; reduce the supply of fresh, nutritious, local produce available to combat our nation’s chronic disease and obesity challenges; and increase our nation’s dependence on imported food.
Take Action
That is why it is so critical for you to take action today and comment on these rules, before it’s too late. The deadline for comments is Sept. 16, so we have just three months to make our voices heard. You can make a difference! The Feds need to know the impact that these rules will have on your farm, your business, and your community. Whether you are a local food producer or supporter, FDA has to hear from you.
Visit the CFSA website’s FSMA action page, https://www.carolinafarmstewards.org/fda-comments-how-to/, to find out how to submit your comments today!