Food Security and the Food Safety Modernization Act

The Food Safety Modernization Act (FSMA), designed to establish and enforce food-safety standards for foods from domestic and foreign origins, focuses federal regulation on the prevention of food contamination. Many concerns have been expressed about how FSMA-compliance costs will affect the economic viability of very small and small farms, which have higher average compliance costs than do larger farms, thus marginalizing their ability to compete in the marketplace. The purpose of this study is to estimate how FSMA will affect differently sized US and international tomato producers in the fresh-tomato industry. A simulation approach is applied for changes of quantities demanded, revenues, and profits for differently sized farms based on elasticities estimated using a differential approach. Our findings indicate that both domestic and foreign tomato producers with both very small and small farms are expected to see significant losses in profit after the adoption of FSMA. The practical implications of these findings are that the Food and Drug Administration (FDA) should be aware of, be concerned about, and take into consideration the adverse consequences of their regulatory decisions on food prices, food-industry costs, the structure of the food industry, and product diversity. In essence, the FDA needs to strike a balance between food safety (the primary objective of FSMA) and market performance.