USDA labeling cost estimates differ from university findings

Of all the provisions contained in the 2002 farm bill, the most important for fruit and vegetable producers may be the one mandating country-of-origin (COOL) labeling for various commodities, including many of the ones they grow.

Starting in September of 2004, the labeling law will require food retailers to insure that fresh produce and other food products — including peanuts — are labeled to indicate their country of origin. Surveys conducted in the past have shown that consumers over-whelmingly support COOL, and that shoppers usually are unaware that imported produce is being sold in their supermarkets.

The labeling law is nothing new for Florida. Since 1979, the state has required COOL for fresh produce, and Florida's positive experience with the law helped to generate support for the national labeling initiative.

But while grower and consumer groups have shown considerable enthusiasm for the new law, USDA has gone about the process of implementing the legislation in a rather haphazard way. Intended or not, agency officials appear to be cool towards COOL.

In a recent press briefing, USDA officials reviewed the proposed rules governing COOL. In addition, they revealed their latest cost estimates for implementing the rule and stated that their research data failed to demonstrate a “quantifiable” benefit from COOL.

The problem is, USDA has discounted research conducted by the University of Florida and other institutions that show a significantly less cost of implementing the law. The Florida study also demonstrates several “quantifiable” benefits from COOL.

USDA stated last fall that record-keeping expenses associated with COOL would be about $1.9 billion annually. In their most recent press briefing, agency officials had ratcheted down the estimate to $582 million for the first year of development and operation, dropping to about $458 million per year once the labeling program is in place. The overall cost of the program, when capital costs are added, could reach about $3.9 billion, says the USDA.

The University of Florida study — conducted by the International Agricultural Trade and Policy Center — says the costs and complexity of labeling “have been overblown, often to absurd levels.” Past estimates of cost by USDA and others are “substantially overblown due to errors in both legal and economic assumptions,” states

Assuming that USDA adopts a least-cost alternative program for complying with the labeling law, Florida economists believe the total record-keeping cost for producers, handlers and retailers should be between $69.86 million and $193.43 million.

These more realistic estimates constitute a significant reduction in the USDA estimate.

“The reduction arises from errors in calculation by USDA and from a labeling program that pursues the goal of regulatory efficiency by eliminating onerous requirements and piggy-backing on existing records kept in the stream of commerce,” states the Florida study.

Considering that U.S. consumers purchase and eat approximately 236.4 billion pounds of commodities covered by the labeling law, the per-pound cost of record-keeping is between 3/100ths and 8/100ths of a cent per pound, contend the Florida experts, adding, “There is no reason to believe this small cost impact should lead to consumers avoiding covered commodities (such as beef) and substituting non-covered commodities (such as poultry).”

And as for quantifiable benefits, the study states that every credible study has shown that consumers value this information, and some studies show a significant willingness-to-pay to get the information. “The combination of survey data and experimental auction data that is currently available lead us to the conclusion that the consumer willingness-to-pay for labeling amounts to billions of dollars across all commodities,” say the Florida researchers.

Producers also stand to benefit from food labeling, since an increased willingness to pay on the part of consumers often translates into higher prices and increased returns to producers, according to the Florida study.

At the very least, the glaring inconsistencies in the USDA and university research bring into question the supposedly unbiased and reliable nature of information released by the federal government. At a time when our government is demanding more and more information from its citizens — in the form of legislation such at the Patriot Act — perhaps it's time that citizens demanded more answers from their government.

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