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Stanislaus County Farm Bureau's Anna Genasci and JCS Marketing's Kristin Platts sit down with Norm Groot, executive director of the Monterey County Farm Bureau, to discuss a recent Cal Poly study they commissioned to examine the true cost of regulatory compliance for California growers. Groot breaks down key findings from the report, putting real numbers behind the growing burden of compliance in the ag industry.
Stanislaus County Farm Bureau's Anna Genasci and JCS Marketing's Kristin Platts sit down with Norm Groot, executive director of the Monterey County Farm Bureau, to discuss a recent Cal Poly study they commissioned to examine the true cost of regulatory compliance for California growers. Groot breaks down key findings from the report, putting real numbers behind the growing burden of compliance in the ag industry.
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Speaker 3:This is Kristen. And this is Anna.
Speaker 4:And this is Farm Bureau Friday. Hi, and welcome to another episode of Farm Bureau Friday. I'm Kristen Platts with JCS Marketing and MiAg Life.
Speaker 3:And Anna Janacee with Stanislaus County Farm Bureau.
Speaker 4:And we're here with Norm Groot. He's the executive director for Monterey County Farm Bureau.
Speaker 3:So thanks for joining us this morning, Norm. Before we jump into today's topic, which is cost of compliance, the ever increasing cost of compliance for our ag industry, can you just introduce yourself, your role with Farm Bureau in Monterey County?
Speaker 5:Sure. I've been the executive director here for Mar Monterey County Farm Bureau for just about fourteen and a half years now. My prior Farm Bureau experience was as a volunteer. I started in Orange County on their board many decades ago and ended up being a district director for Los Angeles and Orange County on the state board for thirteen years. And so this was a natural step to move into an agricultural oriented community and really make my footprint here very important to keep this agricultural community moving forward, and particularly when it comes to regulars regulates regulatory programs, everything that's involved there.
Speaker 5:It's great to be that voice of agriculture here.
Speaker 4:Great. Norm, today, we are talking about your regulatory compliance cost study that you guys had conducted recently. Can you just walk us through that report? When was it created, and what led to it being commissioned?
Speaker 5:Sure. This really goes back to 02/2006 when we had some concerns about how water quality regulations, the irrigated lands regulatory program, was going to impact the cost of production here on the Central Coast and particularly for leafy greens and vegetable growers. And so they did a study and found some significant amounts, but it was just the genesis of that irrigated lands program. And really as we move through the different iterations, we realized that there's other regulatory programs that impact costs as well as the water quality regulations. And so 2017, we did an update.
Speaker 5:We figured that was a good decade to see how regulatory cost compliance had expanded, and we found that it was 795% more in that one decade alone. Looking at it last year, our board was concerned that not only do we have another iteration of our irrigated lands regulatory program, but we're looking at air quality issues, food safety, labor, particularly wages, of course, but also health and safety, ag chemical use, and the permitting that's going on there. And so we decided now's a good time to do another update even if it isn't a decade. And, unfortunately, what we found is that we had another 64% increase in regulatory costs just in those intervening eight years, and, really, that brings the total cost of regulatory compliance for a Central Coast Grower to $1,600 per acre. That's a pretty astounding amount.
Speaker 5:When people start wondering why the price of their leafy greens and vegetables and other products are going up, not just here from the Central Coast, but throughout California. The regulatory climate that we have is really inducing a lot more of costs in the production of those items.
Speaker 4:Can you tell us who compiled the report?
Speaker 5:Sure. It was done by Cal Poly, San Luis Obispo. The two professors that did the initial study in 02/2006 are still with us, and they did the 2017 as well the 2024 updates. They had the system in process, so it was easy for them to step back into this and really update their numbers, going to the same growers using the same data sets and trying to update those. And so we are very fortunate that we have that consistency that those two professors are available to us to update the study and not have to basically start from scratch all over again.
Speaker 5:So they understood the methodology. They understand agriculture, and they were very proactive and very excited to actually do this update.
Speaker 3:Norm, I think it's important, and you touched on this. So you guys initially were looking at the irrigated lands program and water regulatory costs. Right? But as you move forward with report, you expanded into air quality, labor. So not just talking about the increased minimum wage and the elimination of a ten hour workday in agriculture, but also just real calocea safety.
Speaker 3:Can you speak to some of those other regulatory entities and how those are impacting your growers locally?
Speaker 5:Sure. I think the obvious one that that everyone knows about is the cost of labor here in California with the minimum wage increasing as well as the change to the overtime rules. Those were dramatically increased in the last eight years essentially. And what we found is those went up a 25%. That was the leading, I guess, factor in this most recent report that indicated that we're really dramatically increasing the cost of doing business in California in the agricultural sector.
Speaker 5:We also found that labor health and safety also increased up to 52% more in that eight year period. And so when you combine those two factors together, labor really becomes the overriding concern of where we're going in California and how we can afford to continue doing what we're doing in agriculture. And here in the Salinas Valley and in Central Coast with the crops that we grow here, we do need those hands to harvest our crops. And so we don't have that option of going to some sort of mechanical harvesting yet. Even though there's a lot of research and a lot of dollars being thrown at that right now, we don't have those solutions that are financially viable.
Speaker 5:When you look at one of the other ones that probably people don't realize or understand as much as air quality regulations and how those impact not only what we do on the farm with our stationary equipment, but now moving into farm equipment that is mobile as well as what we're using to transport our products either from the field to the market or the field to the cooling facility and then to the processors. With that, we saw 56% increase in the last eight years. And so you you're seeing a trend here. These numbers and percentages are pretty darn large now, and they are overriding the fact that now it's over 10% of our costs of input are regulatory costs here in California. And to be exact, it's about 12 and a half percent now.
Speaker 5:So when you start thinking about how we're producing our crops here and realizing that the farmer is not getting a recovery of those costs in the market price that he is selling the product for, it hits the bottom line pretty hard. And so that makes it all the much tougher for our small farmers to really remain financially viable from year to year.
Speaker 3:So I have a quick follow-up question to that, Norm. I think it's really important for folks to understand while this report was commissioned by Monterey County, these trends are impacting California growers. It's not specific to Monterey Producers. But what are you all doing, or what are you hoping to do with this data that you have solidified now? Like, how are you using it as an advocacy and agricultural literacy tool?
Speaker 5:Well, we are providing it to the elected officials who are making those new laws that create these new regulatory programs, and we're watching closely where we can insert this into the conversations for new laws that they're developing this year, which there are already several that we're having that conversation on. But moreover, with the regulatory agencies themselves, helping them to understand that everything that they do has a cost. And for example, when we went through our last iteration of the irrigated lands program here, they really didn't look at the economics of what they were doing to agriculture with all these new requirements, whether it's the gathering of data from points in the field, how they have to report it, understanding the calculations that are required when they're reporting. Those all come into the aspect of the regulatory costs. And so I think it's more important that we get this out in front of the regulators so that they understand when they're proposing changes to programs or new programs that these have financial impacts to agriculture.
Speaker 5:And so we are having those discussions. I think one of the elements that we found in the report too is that there's a new cost of education and training within agricultural companies to keep up with all these compliance requirements. Whether it's the reporting or whether it's the data gathering, there's a lot of education that has to take place. And unfortunately, a lot of those programs change from year to year. And so that is really a dynamic that we are seeing that farming operations as well as ranching operations and the processors have to keep up with those changes.
Speaker 5:And right now, that pencils out at about 25 and a half dollars per acre. So when you start adding all of these costs per acre up and we come to that $1,600 number here on the Central Coast, we can translate that easily to a lot of the other crops that are being produced in California simply because we all more or less work under the same regulatory scheme.
Speaker 3:So I'm stepping on Kristen really quick. One of the things that I've seen recently come out of California Farm Bureau, and they are noting some of your numbers, is the Brian the project that Brian Little is working on right now to provide a tax cut opportunity for producers who are paying overtime. So hopefully, fingers crossed, that'll be one area where we can see a little bit of breathing room. But as we know in California, though, there will be no rolling back of any sort of regulatory change.
Speaker 5:Yeah. And I think that's an important discussion that we need to have, and I think the tax roll break for overtime costs may have a significant impact. It just depends on how it is implemented and the rules around it and how quickly payroll systems can be modified to actually make that deduction when they're paying the taxes that that employees are collect or they're collected from the employees. So I think there's a lot of answers there that need to be forthcoming in how that mechanically is going to work and hopefully not another additional burden for farms to calculate that and determine how that's going to work. But there is an opportunity there.
Speaker 5:But you're right. I think we're in a regulatory system right now where we really don't see those rollbacks, and every layer that's added on additionally becomes a cost just like what we saw on this report.
Speaker 4:Annie, you covered something that I was gonna ask. But, Norm, you talked a lot about the $1,600 an acre, all the things that that roll into that. Were there any other parts of the report that you were really surprised by, or is there any piece of it that deeply concerns you that you might wanna dive deeper into right now?
Speaker 5:Well, I think the one area I would say that surprised me is actually a positive is that we're not seeing escalating costs for food safety requirements. I think we pretty much got that down in what we're producing here with leafy greens and fresh vegetables, and we are actually the leading area for food safety related to the leafy greens marketing agreement. And people have been doing that for a while. So we did not see as dramatic a leap in those costs where other areas, as I've noted, went up substantially. So maybe that's leveling off a little bit, but that's still one of the primary concerns that we have for our food supply is maintaining that food safety element and continuing to develop new practices as the science either directs us or proves that something needs to be improved or changed.
Speaker 5:That was a relief, I think. We are all expecting a lot more from the food safety elements that people have to do, and it is a pretty costly per acre where we're looking at $244 per acre maybe on an average for food safety requirements, but that is relatively a lower percentage than what we saw for a lot of the other areas of regulatory concern, particularly the labor and labor health and safety areas.
Speaker 3:That's interesting. I think it's important to note, Norm, Correct me if I'm wrong, and this kinda leads into our next question. But the marketing agreement around leafy greens, that was something that growers did proactively. Right?
Speaker 5:Yes. That was what the industry took on themselves rather than allowing the regulators to dictate what we should be doing. We knew better how to solve those problems and develop the leafy greens marketing agreement in cooperation with growers as well as the processors and the transportation sector to really make sure that we're we're touching all parts of the supply chain as the product moves through it. We are the epicenter of this, and I think many across the country are now wondering why they are having to do the same thing. And really, it's for the benefit of our food supply in general, to make sure that we are producing a product that is the most safe in the world, as we call it.
Speaker 5:But, yes, we are the epicenter of food safety, and that is, I think, primarily one of the bigger choices that the operations have to make is how they handle their food safety practices. And unfortunately, it has become a huge liability issue too if something is recalled, that they have to manage that process also. And so there's a lot of back end practices that have to be observed at the same time. So it is all encompassing, and I think most operations here would say food safety is their primary concern when they're harvesting product and putting it into the supply chain.
Speaker 3:So, Norm, I do wanna maybe take us down a route of hopefully a more positive note than additional regulatory cost. It's it seems we have the most strict rules in regards to agricultural production anywhere else in The United States, and I would argue anywhere else in the world. How can we switch the narrative rather than saying, oh my lands, we have to comply with all this stuff. Is there an opportunity for us as California growers to market our products as you just said it, the most safe in the world and get a premium for that. Do you see that opportunity?
Speaker 5:I think it starts with telling our story. I think we need to tell a better story as we go along, and it can't just be me, a talking head, so to speak. It has to be the growers themselves putting that forth into the public domain, so to speak. So first of all, I think we need to tell our story better. And second, I think we have a good story to tell.
Speaker 5:We just need to figure out how to get that into the public domain, and most of that probably would need to go through social media. And we all know social media has its pitfalls and can easily turn around into a war of words with those who disagree. We have to be very careful about how we approach that. We've often talked about how we could manage that as a overall brand, like Salinas Valley Produce is the safest in the world, which we all realize is probably very true statement, but it is not really out in the public domain, partly because we have so many food safety recalls that are precautionary and not necessarily a threat to the food supply. As the science evolves and the testing evolves, we're testing for parts for billion now.
Speaker 5:That makes the science all that more complicated, and so the precautionary recalls are much more in the public domain, and that's what people see. And they don't necessarily relate that to the science of how we're discovering those situations. So I think there's a great story that we can tell, and hopefully, we can make that something as a pride of California product, whether it's lettuce, whether it's peaches, whether it's avocados, whatever the case may be. I think there is an opportunity to do that, but everyone has to realize too that comes with a cost of production, and that they will be paying for that hopefully at the consumer level. And that's something we're not seeing right now.
Speaker 5:And that's one of the things that this report pointed out is that in those eight years from 2017, the price of lettuce has actually only increased at the wholesale level by less than 1%. The dollars are not recovering the costs of doing all these great things for the consumers because the consumers are not recognizing the value of what's going into their food supply. And, honestly, I don't think the average consumer understands that a lot of their product is grown in The United States. But it also comes from other countries, particularly South of us. So I think that's something the consumer needs to be more aware of as they look at products in the supermarket.
Speaker 5:We can't have peaches twenty four seven, three 60 five because that just isn't the season here. So they must come from someplace else. So I think there is a good story to tell. We just need to figure out how to get it out there.
Speaker 3:It's funny that you say that, Norma. I used to feel very passionately about people understanding where their food comes from. And as I spent more and more time in our industry, in particular, my relationship now with Farm Bureau, it's such a and you mentioned this, the data, the science. It's such a scientific operation that our producers are doing. It really is hard to articulate what it is that they're doing.
Speaker 3:And so I've changed my narrative now to, I I want consumers to have an appreciation for our farmers, ranchers, and dairy men, and all of the things that they juggle day to day, year to year in order to ensure that we have the safest food supply in the world on our tables. And I agree with you. I think there's an opportunity there. We just we need to figure out what that messaging looks like.
Speaker 5:Yeah. Exactly. And I think to some degree, we have spoiled the American consumer by having great product. It's almost perfect. Every time they go into the supermarket, they can find anything and everything they need $24.07, $3.65.
Speaker 5:And so we have really spoiled them, and we are seeing that now. It's the lowest cost of production in the or excuse me, of the price of food in anywhere in the world related to the overall income level. And so we need to figure out how to put that value back into our domestic food supply and really get the consumer to appreciate what we do as farmers and ranchers to get that product to the marketplace.
Speaker 4:Is there a place that people can go and see some of this data?
Speaker 5:Sure. The report is available off our website, which is MontereyCFB.co. So Monterey is in our area here, but CountyFarmBureauCFB.co. And there's a link on our landing page to the report itself that can be downloaded so you can read the entire thing. And it has a lot of good data and and a lot of detail related to the various different areas of regulatory compliance that they studied as well as some things that they decided were really outside the scope that people may have questions about.
Speaker 4:K. Yeah. And it might be interesting to see how it translates across county to county.
Speaker 3:Yes. Yeah. Maybe before we wrap it up, Norm, is there anything we're missing? Is there anything else you'd like our listeners to know about the reports or what you all are doing with the data?
Speaker 5:I think the overall message here is it's getting increasingly more difficult to do business in California, whether it's agriculture, whether it's manufacturing, whatever the case. And this just demonstrates that with our excessive regulatory burden that we have in California that really puts us at disadvantage in some cases. It really highlights the fact that California is an expensive place to live and work, and we are not seeing any light at the end of the tunnel where they're telling us they're not gonna continue doing this. So I think we need to have that conversation with our legislators and moreover with our regulators to get them to understand that California is an important part of our food supply chain, and we need to make sure that we protect agriculture, whether it's the smallest barber or all the way up to the larger farms that are producing large quantities simply so they can fill the marketplace. It's an important message we need to continue putting out there.
Speaker 4:Well, we like to close the show with a call to action, and I feel like that kind of was action. I was gonna ask you what should your call to action be for our listeners, for your members, in your Farm Bureau, or members across Well,
Speaker 5:as I tell our farmer and rancher members here is they've got to get out in front of those legislators and those regulators and tell them their story. Tell them what they do on the farm. We invite many of them to come and take tours here because our intensive agricultural system here is very unique and very different, and also because we can do it because we have water, climate, and soil that supports that type of intensive agriculture. And so I suggest or continue to suggest to all our farmers and ranchers that it just can't be me putting this message out there. It has to be them themselves from their experiences on the farm and ranch.
Speaker 3:What a great way to wrap it up, Norm. Thank you for your time this morning and, your commitment to Farm Bureau. And, honestly, the I really appreciate that you and your board and your team there saw the value in putting in investing in a report like this.
Speaker 5:Right. Thank you. Appreciate the time.
Speaker 4:Yeah. It was really nice meeting you, and thanks for being on the show.
Speaker 5:Very good.