The Wilting Effects of Regulation in the Salad Bowl - A Two-Decade Perspective

Rising costs of regulation are an increasing concern for California growers. An initial study of regulatory costs in California agriculture was conducted in 2006, as means to compare California’s regulatory environment to other competing states. Industry groups in the Salinas Valley contacted Cal Poly to update the original study in 2018 as new state and federal laws imposed significantly higher regulatory burdens on growers, specifically with respect to food safety, water quality, labor wages, air quality and worker health and safety. We used 2017 data as it was the most recently completed full production year. As the 2020s progressed, additional regulations, including the Sustainable Groundwater Management Act, the Irrigated Lands Program, equipment emissions regulations and minimum wage and overtime laws for farmworkers were being phased in. Industry groups once again requested an updated study to quantify the evolving regulatory landscape for farms and ranches. This report updates the 2017 case study that documented the regulatory costs on a commercial-scale head lettuce grower in the Salinas Valley. The same grower that we interviewed for the previous two projects was willing to cooperate on the 2024 study, providing a snapshot across three different decades on one large Salinas Valley lettuce operation. In the 2006 study, the cooperating lettuce grower reported regulatory costs totaling $109.15 per acre or 1.26% of total production costs. Lettuce production costs were $8,793 per acre. Workers’ compensation comprised over half of regulatory costs in the initial report; other compliance areas included water quality, food safety, worker education and training. However, by 2017, the regulatory landscape had drastically changed, precipitated by a 2006 E. coli outbreak in spinach in the Salinas Valley (that occurred after the 2006 data was collected) that altered the landscape for food safety compliance. New environmental and worker wage and safety laws were also imposed in the ensuing years. The 2017 data showed that regulatory costs were $977.30 per acre, or 8.90% of total production costs. The grower’s total production costs were $10,977 per acre in 2017. The results of the first comparison case study showed that production costs increased by 24.8% from 2006 to 2017, but the costs of regulatory compliance rose by 795%. Increased compliance requirements in 2024 bring the grower’s total costs of regulation to $1,600.12 per acre, which is a 63.7% increase from 2017 and a 1366% increase since 2006. Total costs for lettuce production increased to $12,702.47 in 2024. Over the entire period, this is a 44.4% increase in production costs. Regulatory costs comprised just 1.24% of production costs in 2006, then rose to 8.9% of production costs in 2017, and are now calculated at 12.6% of production costs. These cost increases have occurred while farm-gate prices have remained relatively stable. From 2007 to 2017 the average farmgate value per acre of head lettuce increased from $8,637 to $12,415 or 43.7%, which primarily covered increased production costs. However, the most recent estimates of farmgate value for 2023 are $12,461 marking only a 0.37% increase. The following pages summarize the regional, state and federal laws that lead to these costs.