Setting Producers Free —
Production Agriculture And The Regulatory Burden:
Can States Help Northeast Production Thrive? Are They Inclined To Do So?
Jim Prevor’s Perishable Pundit, November 16, 2015
Ben Campbell has consistently demonstrated that interesting work relevant to the produce trade is being done in places many don’t realize. Examples of his outreach to the trade include:
Perceptions And Misperceptions: Consumer Attitudes On Organic And Local — University Of Connecticut Study To Be Unveiled At New York Produce Show and Conference
Connecticut Professor Ben Campbell Comes Back To The New York Produce Show With Seminal Work On Consumer Reaction To The Marketing Of Locally Grown Produce
When we heard he was hard at work on a research project that implies agriculture in the northeast is burdened by regulations heavier than those in other parts of the country, we asked Pundit Investigator and Special Projects Editor Mira Slott to find out more:
Ben Campbell, Ph.D.
Assistant Professor and Extension Economist,
Department of Agricultural and Resource Economics,
University of Connecticut
Q: We’re intrigued to learn what new research you’ll be presenting this year at The New York Produce Show & Conference to once again instigate dynamic industry discussion.
A: This research will look different than what I’ve done for the past couple of years. I worked with Adam Rabinowitz, Assistant Professor in Residence, and Laura Dunn, Graduate Research Assistant. We conducted a study of the regulatory environment of agricultural producers in the northeast.
Q: So it’s not just concentrating on the produce industry?
A: It’s broader… there’s a lot of information about the produce industry, but it’s more comprehensive for agriculture in the northeast. This report was produced by the Zwick Center for Food and Resource Policy, with partial funding from Farm Credit East. The objective was to provide information to producers, policy makers, and other interested stakeholders on both the perceived and real regulatory environment of northeastern states. Notably the specific objectives were:
• Identify regulatory perceptions of northeastern agricultural producers
• Rank states within the northeast as well as select comparable states throughout the United States;
• Provide recommendations on the state level to lessen the regulatory burden for northeastern states.
Q: How did you approach those objectives?
A: We did a survey of producer perceptions of regulations on a variety of topics, and we also came up with a quantitative index to compare the northeast states individually, with states in the U.S. to determine how regulated the northeast is compared to other states in the U.S.
Overall, agricultural producers in the northeast indicated a number of regulations increasing since 2010, and the amount of time and money spent on these regulations also increasing.
Q: Which regulations are you talking about? Do you segment the regulations impacting agricultural producers by category type?
A: We looked at regulation packs: environmental, business taxes, labor, land use, transportation and food safety. Those are the major ones. In each of the categories we looked at, the majority of respondents said regulations had increased since 2010.
Let me break out some numbers for you. In our perception survey of northeast agriculture producers, 67 percent (out of 800 respondents) indicated their regulations had increased in general since 2010. Narrowing it down to specific regulations, 71 percent said environmental regulations had increased, 70 percent said business and taxes, and 75 percent said food safety regulations had increased.
But the major ones that came up were food safety and business taxes, both in the amount of time and money they’re spending on these regulations.
Q: And you focused solely on state regulations?
A: These are all state regulations because federal regulations would apply across the board to everyone. We really focused on the state regulatory environment so that we could do our comparative analysis.
Q: Did you find out how impactful state regulations were compared to federal regulations for context?
A: Yes. We also asked which of the following had the most influence on your business, federal, state, or municipal regulations, and the state regulations came out on top in terms of having the most impact on agricultural producers’ farming practices, followed by federal second and municipal third.
Q: When defining the northeast, what states are you including?
A: Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont.
Q: Were there big differences between states in how they viewed regulations?
A: So we know northeast producers believe regulations are increasing regardless of the state they’re in. In the survey we asked, how do you perceive your state and how do you perceive other states. What we found was, by and large, most northeast producers felt their state was regulated but other states were at the same or higher regulations, but it varied by state. For example, New Hampshire producers believed they were hit with more regulations than other states in the northeast, and Maine and Vermont producers felt the same.
You have these mixed state perceptions of how producers view their regulations and those of other states. New York, Connecticut and Massachusetts respondents believed they had a little bit less regulation than other states.
Q: What’s the real story?
A: I’ll be building towards that in my presentation. As a part of this, we created our own index. A number of studies in notable places, including the New York Times and CNBC, rank states by how friendly they are to businesses, and New England and the northeast particularly continue to do pretty poorly in those rankings.
We took an agricultural angle, not a business angle overall. We created our index with similar variables used in other studies, such as one done by Colorado State. And we came up with our own index to rank states, not just in the northeast but comparable states in the U.S. based on our views of what was important to put in this index.
What we find overall is that New England is more highly regulated than roughly 10 other comparable states in the U.S. We had 16 states in the index, and five of the six bottom ones were in the northeast, or more highly regulated in the northeast than in other states in the U.S.
Q: That’s quite a statement considering the competitive market pressures and low margin nature of the produce industry.
A: That’s exactly right. What was interesting… we had the perception part, where producers ranked how they perceived things, but it didn’t necessarily align with what we found in the index. On the producer end, they felt New Jersey was a highly regulated state, but we found New Jersey was one of the least regulated states in comparison.
We put these states in ranking. It means state A is more regulated than state B, but it doesn’t mean A is regulated high or low. We’re not saying New Jersey is highly regulated or minimally regulated; we’re saying this in the context that New Jersey came out with less regulation compared to other states in the northeast. This is surprising.
The assumption many people had, and what the producers felt, was that New Jersey was at the top of the list for regulation. It was what we had expected as well, and it turned out to be the opposite.
You always hear New Jersey’s bad with respect to regulations. Yet in our index ranking taking a quantitative view, New Jersey is less regulated than Maine and New Hampshire, which turned out to be the most regulated states in our index ranking.
Q: Did you separate out your state rankings by the type of regulation, and if so, did the rankings fluctuate, maybe a state is one of the more heavily regulated states on the environment, but one of the least regulated on tax issues?
A: States moved around on the rankings based on the type of regulation, getting different rankings for tax policy, labor, environmental, etc. In one ranking, New York was badly regulated, and in another area minimally regulated.
Q: So honing in on New York as an example, how did it fare in the different rankings on the index?
A: In overall rankings, New York came out fifth out of eight northeast states on its regulatory environment. It fell into the second tier of rankings with Connecticut, Vermont, and Rhode Island and the bottom two were Maine and New Hampshire. Looking at the tax policy of New York, it was the least regulated in tax policy but most regulated in labor policy and environmental policy. This is our ranking when we put our factors in there. The index is our version of a quantifiable reality.
In the survey, New York ranked second highest in the perception it was over regulated, with New Jersey taking that top spot.
Q: So perception is not reality.
A: Roughly 80 percent of respondents in New York and New Jersey believed they were over-regulated. The story would be there are differences in perception versus our quantitative ranking. I hesitate to say reality. It’s our quantitative representation of reality.
New York is in the middle of the pack, where producers thought it more highly regulated than what we found in other states. Similarly, New Jersey producers perceived their state more highly regulated than what we found in other states, yet New Jersey comes out in our index ranking as the least regulated.
We have Maine and New Hampshire, where producers believed they didn’t have much regulation, and we found in our index those states more regulated overall.
Q: Do you average out the different regulatory categories to come up with those overall rankings. For instance, you point out that New York is least regulated in tax policy, but most regulated in labor and environmental policies. How do you weight those different issues? And the subsets of those issues, which may vary based on the state you’re in and your company’s particular needs?
A: That’s an excellent question, which I will address more during my talk. I can tell you that in our index, getting hammered in labor and the environment really brings down New York’s overall score despite it being least regulated in the business tax category.
Whereas with New Jersey, it’s always in the upper third of these different categories; it’s not always the best but never the worst, so New Jersey averages a higher ranking for being less regulated. New York has two really low scores bringing our quantitative ranking down to show it is highly regulated.
Q: Who did you survey, and how many are in the produce industry? Are you able to pull out those respondents’ answers and provide industry-specific insights? Did you find any big differences in respondent answers based on what industry they were in?
A: Thirty percent of our sample was fruit and vegetable producers. I don’t have that detail to share with you now, but I’m working on breaking down the information in the survey, which will be part of my talk at the New York Produce Show.
What we did in our modeling was to determine perceived differences in regulations by type in respect to the regulatory climate. And I don’t think producers of fruits and vegetables were different than other groups in that vein. So generally, respondents in the produce industry had the same views as everyone else, with the exception of transportation and food safety.
For transportation, fruit and vegetable producers thought they were over-regulated compared to field crop producers. And the same thing was the case for food safety. Those are two areas where the produce industry thinks they are over-regulated compared to other agriculture sectors.
But with land use, labor, business taxes, and environmental regulations, we see no meaningful differences in perceptions between sectors.
Q: Did you break down the impacts of the regulation types in terms of resources and costs?
A: I don’t have that information broken down now for you, but I can tell you the fruit and vegetable producer segment is in line with everyone else in believing the resources and costs will continue to increase because of more regulations.
Q: Did you go into the study with a hypothesis, and did you come away with any big surprises?
A: There was no surprise regulations were increasing. The big thing we didn’t expect was the perception versus reality phenomenon. We thought our index rankings would be more in alignment with our producer survey results.
There was some alignment there, but we thought New York and New Jersey would be more regulated overall compared to other states. We didn’t find that. New York was maybe more in line with what we expected, but New Jersey was a surprise. We expected Maine would be more highly regulated than what we found.
Using the results from the report, it is clear that each state has areas they can improve their regulatory burden on agricultural producers. Some states need to focus on lessening the burden of taxes while others may need to focus on labor or environmental policies.
In the big picture, we thought northeast states would do poorly compared to other states, and that’s what we found. We had other states in the model for comparisons.
Q: Which states did you include outside of the northeast?
A: We chose Pennsylvania, Ohio, Michigan, Wyoming, Nebraska, Illinois, Wisconsin, and Idaho. Five of the bottom six states in our rankings are from the northeast. That indicates the northeast doesn’t do as well regulation-wise in agriculture as other comparable states in the U.S. That was our inclination, but we didn’t go into the study to prove that. We set up all these factors, and the results came out as they did.
Q: Doesn’t that create an uneven playing field?
A: It was eye-opening. If we have states in the northeast that are more heavily regulated than other states, it may make them less competitive, whether it’s in labor, transportation or another area.
There’s a whole host of additional costs you might have to pay; it could be an extra regulatory fee or extra time and resources you have to invest. Agricultural regulations affect everyone, especially if you’re a producer. That’s why it is significant for us to see how the regulatory environment in the northeast compares to other states.
The differences in producer perceptions versus our quantitative index, and the breakdown in regulatory categories, are important to understand.
Producers have the right to their perceptions, but the fact the northeast continually falls to the bottom for its agricultural regulatory burdens compared to other states is the big takeaway. Whether you agree with our index, the certain sets of weights and variables we used, or not, this study indicates a competitive imbalance and a need to examine agricultural policy in the northeast.
Whenever we see research where the results don’t match the expectations of people actively engaged in the field, we like to assess why that might be so.
In our experience, the definitions of the regulations, the legal requirements, don’t always speak to the regulatory burden.
One of our speakers this year in the Global Trade Symposium is Gualberto Rodriguez of Caribbean Produce Exchange in Puerto Rico. You can see the piece about his presentation here.
Back when the Pundit was in his salad days and green in judgment, we worked in our family’s Puerto Rican warehouse; it was decades ago and doubtless things have changed, but it was the culture that the inspectors felt they should receive a parting gift to thank them for their services.
One reason we stopped selling frozen eviscerated poultry along with produce was because the inspectors only expected us to give what we had. If we only sold potatoes, they were happy with a $5 bag of potatoes. If we had poultry, they expected a $65 case of frozen chicken!
Working retail, in various places, we saw dramatic differences in enforcement on weights and measures depending on where we were and the culture of the department.
So it might be that a state like New Jersey has tougher enforcement of the rules so they are experienced as more onerous.
The key is that this type of work is very valuable for the industry because it is the kind of study one can take into the state legislature and say “Look. You are killing us. All the produce is going to come from somewhere else if you don’t fix this.”
We are looking forward to getting the hard numbers at the show. Come and join the conversation.
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