Tuesday, June 27, 2017

USDA ERS Publishes Food Safety Costs for Produce Operations Complying to Increased Food Safety Standards (LGMA)

The USDA Economic Research Service released a 64 page report on the costs associated with meeting safety standards established by the California Leafy Greens Marketing Agreement (LGMA).  The costs with the LGMA should be similar to what will be required by the FSMA Produce Safety Rule.  This is based upon 7 produce operations and was conducted in 2012.

The paper acknowledged that it is difficult to assess the costs, and thus come up with average cost/farm or cost/acre for compliance.  They were able to determine where those costs went on average:
  • food safety staff - 38%
  • foremen food safety time - 32% 
  • audits - 17%
  • lost product due to animal intrusion - 11%
  • water testing - 2%
  • Other costs not uniformly collected included harvest worker training, glove use, raw product testing, and external record keeping management systems.
Estimated costs for foreman (based upon time allocation) ranged from 80,000 to 1,012,000 million.
Firms averaged
Table 3
Range of costs per firm for different food safety practices
                                                                        Range of costs ($) Number of observations  
                                                                        Low                High
Cost per firm:
Total field-level audits                                   27,150            305,430                 6
Raw product testing                                                0              90,000                 6
External record keeping                                          0                8,868                 7
Training                                                          19,900              71,398                 4
Protective clothing                                         12,000              52,000                  5
Total water testing                                           7,000               85,000                  7
Lost product                                                            0             304,000                 7
Equipment cleaning/sanitizing                       21,000             250,000                 4
Hired toilet/handwashing facilities                45,451              130,367                3 
and services

Note: In reporting individual costs per firm, there is a mix of costs for different-sized operations, and also a mix of costs for leafy greens and the whole produce operation. The  combination of firms reporting data for any cost also varies. As a result, the numbers in table 3 cannot be added together to get a low and a high for all costs. Source: USDA, Economic Research Service.

How solid are these costs?  Good question.  They are based upon interviews...so if you ask someone what they are spending on mandated oversight....there may be a tendency to look at worst case scenario. Plus were there savings from improved practices?...hard to say.  I believe these costs increases are there, especially compared to processing facilities that already have much of the infrastructure in place.

Economic Information Bulletin Number 173
Food Safety Practices and Costs Under the California Leafy Greens Marketing Agreement
Linda Calvin, Helen Jensen, Karen Klonsky, and Roberta Cook
June 2017

This case study investigates food safety practices and costs for seven firms participating in the California Leafy Greens Marketing Agreement (LGMA), formally known as the California Leafy Green Products Handler Marketing Agreement. All firms incorporated additional food safety practices into their food safety plans beyond LGMA requirements, for their own convenience, risk management needs, and/or to satisfy buyer requests. It was difficult to quantify food safety costs; the analysis concentrated on costs for five food safety practices. The cost-share for each practice—the cost of the individual practice divided by the total cost of the five practices— provides insight into the relative cost of food safety practices. The value of the food safety staff (including clerical staff) time in food safety tasks was relatively large—38 percent of the five costs. Another 32 percent of costs was for the food safety time of harvest foremen. Audits accounted for 17 percent, product unharvested due to animal intrusion for 11 percent, and water testing for 2 percent of costs. This analysis can increase understanding of the relative food safety costs for firms under the Food Safety Modernization Act.

The Packer
Study estimates grower food safety costs
By Tom Karst
June 27, 2017 | 9:37 am EDT

Discovering that labor is easily the biggest component of measurable food safety costs, the U.S. Department of Agriculture’s Economic Research Service has issued a report called “Food Safety Practices and Costs Under the California Leafy Greens Marketing Agreement.”

Authored by Linda Calvin, Helen Jensen, Karen Klonsky and Roberta Cook, the 64-page report looks at food safety costs under the Leafy Greens Marketing Agreement, with a look towards how those costs might compare to complying with the produce safety rule under the Food Safety Modernization Act.

“The main point is that labor is a really big (cost) under LGMA and will probably be really big under FSMA too,” Calvin said June 7.

The case study, according to the executive summary, focused on interviews with seven California leafy greens firms in 2012 and follow-up questions after that.

While the LGMA and the produce safety rule cover the same major categories of risk and many of the requirements are similar, LGMA is generally more demanding with respect to practices, the summary said.

The authors said that the interviews revealed that food safety costs are very tough to measure and not every company provided comprehensive responses.

Costs that could be measured included spending for food safety staff, harvest foremen, third-party audits, product lost due to animal intrusion and water testing.

Counting costs

The study found the largest share of food safety costs were for workers implementing the food safety plan: 38% for the food safety staff (including the clerical staff) and 32% for time that harvest foremen spent on food safety tasks. Harvest foremen spent almost one-fourth of their time on food safety tasks, according to the study.

In the 10-year history of the LGMA, Calvin said some growers have evolved how they use labor on food safety over that time period, shifting some of the food safety tasks to foremen.

“The way they do food safety has really changed that way,” she said.

Third-party audits were a big expense for the firms in the study, accounting for 17% of the costs the authors could measure (LGMA audits making up 11% and other commercial audits 6%). Calvin said several growers said they believed there were fewer audits demanded by buyers now than in 2007, perhaps due to benchmarked Global Food Safety Initiative audits.

The study authors conclude the share of costs for audits under the produce safety rule could be similar to commercial audits faced by LGMA members.

While the study notes that both the LGMA and the produce rule emphasize the importance of field inspections to look for animal intrusion, only the LGMA specifies exactly how much area should be marked off around evidence of animal intrusion and not harvested. The authors said that total lost-product costs were 11% of measured costs for the surveyed LGMA growers. For the firms that were interviewed, Calvin said no one had buffer zones bigger than LGMA required, and half didn’t have any buffer zone because they didn’t have an adjacent risk factor. Some growers — not interviewed in the study — are thought to have bigger buffer zones than LGMA requires, Calvin said.
Under the produce rule, the cost share for buffer zone may be smaller, the study said.

Water testing made up 2% of measured costs for the seven LGMA growers. The authors noted that LGMA requires monthly water testing for all water used in the fields unless a firm qualifies for an exemption. Under the LGMA, firms test all water used in the fields for evidence of generic Escherichia coli (E. coli).

Calvin noted that some growers are doing more water testing than LGMA requires for their own risk management purposes. For example, she said growers have put in place water testing for other commodities not covered by the LGMA.

“It was just easier to have the same rules for training, for water, and also they did more because buyers demanded more,” she said. The authors said that the produce safety rule requires water testing only for field water sources that are likely to touch the plant. The authors concluded that although the produce rule water requirements should cost less than those of the LGMA, buyers may require more testing than the minimum required under the rule.

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