Key Takeaways
- A new Cal Poly report finds regulatory compliance costs rose from $109.16 per acre in 2006 to $1,600.12 per acre in 2024
- Regulations now make up 12.6% of total production costs, compared to 1.24% in 2006
- Largest increases attributed to labor wages, food safety, healthcare, and water regulations
- Farmgate prices for lettuce have remained mostly flat, limiting growers’ ability to absorb costs
- Study offers a three-decade comparison of one Salinas Valley operation’s regulatory costs
Regulatory Burden on California Growers Continues to Climb According To Cal Poly
A new case study titled “Two Decades of Change: Evolving Costs of Regulatory Compliance in the Produce Industry”, published by Lynn Hamilton and Michael McCullough of California Polytechnic State University, documents the sharp increase in regulatory compliance costs faced by California growers. Focusing on a large Salinas Valley lettuce operation, the study tracks costs across 2006, 2017, and 2024.
The study reports that regulatory costs have risen by over 1,300% in the past 18 years, from $109.16 per acre in 2006 to $1,600.12 per acre in 2024. In comparison, total production costs increased 44.4% over the same period, from $8,793 to $12,702 per acre. As a share of production costs, regulatory expenses rose from 1.24% to 12.6%.
Labor, Healthcare, and Food Safety Costs Lead Increases
The 2024 analysis identifies labor-related regulations—including sick leave, overtime, and wage documentation—as the second-largest compliance cost category at $425 per acre, behind only workers’ compensation at $428.40 per acre. These costs reflect changes in California labor law, including a phased-in overtime rule and an increase in mandated sick leave from three to five days.
Healthcare compliance costs under the Affordable Care Act were estimated at $334.47 per acre, more than double the cost recorded in 2017. Food safety, shaped by updates to the Leafy Greens Marketing Agreement and federal Produce Safety Rule, now accounts for $244.15 per acre.
Water quality and groundwater sustainability programs contributed an additional $29.72 per acre in 2024, including costs associated with the Central Coast’s Agricultural Order 4.0 and the Sustainable Groundwater Management Act (SGMA).
Compliance Efforts Expand Across Multiple Regulatory Areas
The Cal Poly study breaks down regulatory costs into ten categories, ranging from pesticide compliance to training requirements. While some costs, such as assessments for research and marketing boards, decreased slightly, others—such as air quality compliance and labor health and safety—saw notable increases. For example, new rules on diesel engine emissions and truck compliance led to a 56% increase in air quality-related costs since 2017.
Despite these changes, education and training compliance costs were one of the few categories to decrease slightly, attributed to a shift in staff responsibilities rather than reduced regulatory requirements.
Flat Farmgate Prices Raise Concerns Over Profitability
While production and regulatory costs have increased, the average farmgate value of lettuce has remained relatively flat. The study notes a 0.37% increase in farmgate value between 2017 and 2023. This stagnation, combined with escalating compliance costs, suggests that profit margins are becoming increasingly constrained for California growers.
The authors note that the state’s regulatory environment may be contributing to competitive challenges, particularly as other countries and states have lower compliance costs.
Cal Poly’s Paper Implications for Policy and Industry
The Cal Poly study concludes that while regulations often serve important environmental and labor goals, their cumulative impact is rarely considered holistically. The case study suggests that policymakers may benefit from greater visibility into how regulatory mandates intersect at the farm level.
The full research paper is available at: https://digitalcommons.calpoly.edu/agb_fac/163/
