By Luis A. Ribera, Fumiko Yamazaki, Mechel Paggi and James L. Seale, Jr
In Choices, Quarter 1, 2016, a publication of the Agricultural & Applied Economics Association
One way economists evaluate the impacts of policies on farms is through the development and analysis of so-called “representative farms.” Representative farms are virtual farms developed by a panel of producers for a specific crop or crop mix at a specific location. We calculate the average cost of production per acre for the representative produce farms, excluding any food safety compliance costs. We then show the results of an analysis of the impacts on the profitability of selected representative farms by comparing results without and with the costs of complying with the Food Safety Modernization Act (FSMA).
The profitability of representative small farms is more negatively affected than the profitability of representative large farms under FMSA. Also, the level of the impact of FSMA compliance costs varies significantly across states. For example, the source of irrigation water, either surface or underground, has to be treated differently, as surface water has higher chances of having a higher microbial count; therefore surface water needs to be tested more often, which increases FSMA compliance costs.