A two-decade study offers a rare glimpse into the books of a large lettuce operation in the Salinas Valley. The research found labor, food safety and groundwater management rules — among many other regulations and fees — have led to a 1,366% increase in regulatory costs since 2006.
The case study, commissioned by the Monterey County Farm Bureau, offers a snapshot of the financial challenges growers endure to operate within California’s rapidly changing regulatory environment.
The researchers sent shockwaves through the agriculture community in 2018, after following up with the same farm 12 years later and finding a nearly 800% increase in regulatory costs. Lynn Hamilton and Michael McCullough, both agribusiness professors at California Polytechnic State University, San Luis Obispo, have returned to the farm once again and factored in the cost increases over the last seven years to build a more refined portrait of the ongoing impacts.
“This just provides evidence of what growers already know," Hamilton told Agri-Pulse. "It's a way to validate what people have witnessed and experienced in their businesses."
In 2006, the grower, who remains anonymous to protect trade practices, reported regulatory costs of $109 per acre, just over 1% of the overall production costs, which were about $8,800 per acre.
Cal Poly Prof. Lynn HamiltonBy 2017, an E. coli outbreak had drastically altered the regulatory landscape, driving strict new food safety requirements under the California Leafy Greens Marketing Agreement. Meanwhile, wages were up, new environmental laws had rolled out and worker safety was of greater importance. Hamilton found regulatory costs at the time were nearly $1,000 per acre, or 9% of the total production costs, at $11,000 per acre.
In 2024, after several more major state laws took effect, regulatory costs hit $1,600 per acre, a 64% increase from 2017 and a nearly 1,400% jump since Hamilton first began the work. Compliance now accounted for more than 12% of the total costs.
Total production costs, meanwhile, rose just 44% over the decades, landing at less than $13,000 per acre, and the farm gate value for lettuce went up at the same rate.
The grower has faced more pressure as the state implements the Sustainable Groundwater Management Act, approves more water quality fees and monitoring requirements for irrigated lands, enacts more stringent emissions rules for agricultural equipment and has phased in an overtime law to increase farmworker pay. Minimum wage rose from $6.75 per hour in 2006 to $16.00 in 2024.
Other labor expenses came with the Affordable Care Act, increases to paid sick leave and higher average wages for piece rate workers. Salinas Valley growers have also grappled with more monitoring and reporting costs through Ag Order 4.0, passed in 2021 by the Central Coast Regional Water Quality Control Board.
According to the paper, “policies are fragmented among a broad swath of government agencies, at regional, state and federal levels, and it is rare that a government agency understands the total regulatory burden growers face or the impacts of increasing regulations.”
Hamilton and McCullough noted that the case study offers a unique look into the accounting sheets for a typical California farm: “No one (except the growers) seems to understand that rising regulatory costs erode profits and limit their long-term ability to keep farming and growing food.”
The challenges are from over. The paper lists recurring drought, climate change, labor shortages and trade and immigration uncertainty “as the U.S.’s number one agriculture state seems imperiled.” It warns of rising international competition, with large agricultural investments in countries like Peru and major California producers shifting operations to Central and South America, where land, water and labor are cheap and regulatory costs are a fraction of that in the Golden State.
The paper concludes that farmers have shown resilience to regulatory costs, but the evidence indicates the “burden has far surpassed production cost increases.”
According to Monterey County Farm Bureau Executive Director Norm Groot, some growers have faced even greater costs. He told Agri-Pulse other crops in the region have been hit with intense pest and disease issues, but he recognized the regulations in the study encompass most growers in the region.
“The costs are continuing to increase for growers,” said Groot. “At some point, the threshold is going to make it very difficult for some of the smaller and medium-sized growers to maintain this level of financial stability, especially with increasing market pressures, as well as decreasing bottom line profits.”
Groot hopes the findings will inform policies as state lawmakers gear up for another session and affordability concerns weigh heavily on their constituents.
“Our legislators and our rule makers at the regulatory agencies need to give ag a break,” he said. “Take a couple years off from new programs, new laws. Let everything catch up to what has been run through in the last seven years.”
For more news, go to Agri-Pulse.com.
