An Economic Assessment of Food Safety Regulations



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An economic assesment of food safety regulations meet and poultry

Landefeld & Seskin

Salmonella

0.9

3.5


50

75

0.5



2.6

Campylobacter jejuni/coli

0.7

4.3


75

75

0.5



3.2

E.  coli O157:H7

0.3

0.7


75

75

0.2



0.5

Listeria monocytogenes

0.1

0.3


50

50

0.1



0.2

Staphylococcus aureus

1.2

1.2


50

50

0.6



0.6

Clostridium perfringens

0.1

0.1


50

50

0.1



0.1

   Total


3.3

10.1


n/a

n/a


2.0

7.2


VOSL = 5 million

Salmonella

4.8

12.2


50

75

2.4



9.2

Campylobacter jejuni/coli

1.2

6.6


75

75

0.9



5.0

E.  coli O157:H7

0.9

2.2


75

75

0.7



1.7

Listeria monocytogenes

1.3

2.4


50

50

0.7



1.2

Staphylococcus aureus

3.3

3.3


50

50

1.7



1.7

Clostridium perfringens

0.5

0.5


50

50

0.3



0.3

   Total


12.0

27.2


n/a

n/a


6.7

19.1


1

Data for these two columns were supplied by FSIS.

n/a = Not applicable

Source: Buzby and Roberts, 1996

9

Microbial pathogens can be present in foods other than meat



and poultry; the 1996 outbreak of 

E. coli O157:H7 from bottled apple

juice is one example.



12

Economic Research Service/USDA

An Economic Assessment of Food Safety Regulations

Table 4--Scenarios used to evaluate HACCP rule and benefits estimates

Effectiveness:

Valuation method

Annualized net

pathogen

Discount


for premature

benefits


1

Scenario/description

 reduction

rate


death/disability

Low


High

------Percent------

-------- $ billion (1995) -----

Preliminary FSIS 1995 proposal

90

7

Landefeld & Seskin



2

8.4


42.1

Low-range benefits estimates

20

7

Landefeld & Seskin



1.9

9.3


Mid-range benefits estimates I

50

7



Landefeld & Seskin

4.7


23.4

Mid-range benefits estimates II

50

3

VOSL



3

= 5 million

26.2

95.4


High-range benefits estimates

90

3



VOSL = 5 million

47.2


171.8

1

Benefits begin to accrue five years after the HACCP rule is enacted, and extend over 20 years.



2

Landefeld and Seskin VOSL estimates after averaging across gender and updating to 1995 dollars using BLS usual weekly

earnings.

3

VOSL = Value of a statistical life



Source: Economic Research Service

Table 5--Comparison of HACCP rule costs

FSIS preliminary cost

FSIS revised cost

IFSE cost

Intervention

Initial


Yearly

Initial


Yearly

Initial


Yearly

Million Dollars

Sanitation SOP

1

3.0



16.7

3.0


16.7

-

-



HACCP planning and training

2

61.0



-

95.0


4.0

136.4


142.8

HACCP recording

3

      -


54.1

-

54.1



-

260.3


Temp. 

 

control



4

15.9


16.7

-

-



-

-

Antimicrobial treatments



5

-

19.8



-

-

-



-

Testing


6

24.0


68.0

3.0


16.9

-

550.0



Modify process

7

-



-

-

5.5-20.0



-

-

1



Revised'>FSIS Preliminary and Revised: identical.  The initial cost includes plan development and training.  The annual cost includes

recording,  recording review, and record storage.

2

Preliminary: one plan for each process of each animal species; same training as revised.  Revised: one comprehensive plan; 3-day

training course for each employee, additional updates.  IFSE: no guidance on plant; $10,000-per-plant training cost.

3

Preliminary and Revised: based on time and the number of critical control points, shifts, and production lines.  IFSE: no guidance.

4

Preliminary: cold storage capacity to hold newly chilled meats; planning, recording, reviewing, and training costs for operation.

5

Preliminary: assumes industry will use hot water with no cabinet system in meat plants and a chlorinated water system in poultry

plants to treat carcasses.

6

Preliminary: requires each plant to test each slaughter species and ground meat product each day for 

Salmonella. Costs include

sampling, training, and sampling plan development costs. Revised: requires the use of 

E. coli testing for slaughter plants on a

production basis.  FSIS does 

Salmonella testing.  IFSE: assumes daily composite samples of ground products, weekly composite

samples of subprimals, and at least nine other samples of either carcasses or production areas weekly.

7

Revised: meat slaughter plants use steam vacuum system and poultry producers a TSP rinse to reduce pathogens.

Source: Economic Research Service, based on data from: USDA, FSIS; Institute for Food Science and Engineering, Texas A&M

University

no rationale for HACCP plan costs and assumes a far

greater number of microbial test samples would be

required to assess process control of the plant produc-

tion process.

Table 5 indicates far higher cost estimates from IFSE

than from FSIS.  The FSIS estimates for sanitation

SOP’s and HACCP plan development appear to be more

reasonable than the IFSE estimates because: (1) FSIS is




13

Economic Research Service/USDA

An Economic Assessment of Food Safety Regulations

producing only about 1 percent of annual slaughter

and processed meat and poultry output under the

preliminary HACCP plan.

The cost disadvantage of small plants in the prelimi-

nary pathogen reduction rule stems from the require-

ments for one HACCP plan and microbial test for

each process of each animal species.  Small plants

tend to slaughter more animal species than large

plants and have a similar number of processes per

species as large ones  (Ollinger et al., 1996).  Conse-

quently, the preliminary FSIS pathogen reduction plan

required a far greater number of microbial tests and

imposed higher HACCP recordkeeping costs per

pound of output for small plants relative to large

plants.  By requiring only one HACCP plan per plant

and placing microbial testing on production rather

than on the daily schedule, the revised pathogen

reduction rule greatly lowered the cost disadvantage

of small plants relative to large plants.

The ability of a plant to remain profitable depends on

its cost disadvantage relative to competitors and the

product market in which its sells its products.  Using

Longitudinal Research Database (LRD) data at the

U.S. Bureau of the Census, we provide estimates of

plant regulatory costs per pound of output by industry

for very small, small, and large plants in table 7.  Beef

slaughter plants are those plants producing car-

casses, boxed beef, boneless beef (including ham-

burger), and edible organs (SIC 20111).  Pork,

chicken, and turkey slaughter plants have products

identified in SIC 20114, 20151, and 20153.

Table 7 contains cost estimates of both the prelimi-

nary and revised FSIS pathogen reduction rule for

plants in seven slaughter and processing industries

and the three plant size categories identified by FSIS.

The pathogen reduction rule is more costly for small

plants than for large ones.  However, the revised plan

greatly reduced costs in general and the cost disad-

vantage of small plants in particular.  For example,

pathogen reduction costs for very small beef plants

dropped about 66 percent, while pathogen reduction

rule costs for very small pork processing and sausage

plants dropped about 99 percent.

Although industry classifications in table 7 are based

on particular product lines, they do not show  geo-

graphic or service considerations that may confer

market advantages on small plants relative to a large

one.  Additionally, Ollinger et al. (1996) found that

from 60 to 90 percent of small (less than 25 employ-

ees) beef/pork slaughter and pork processing and

sausage plants failed to survive to the next census

year (5 years) after entry.  Given the modest differ-

providing considerable plan development and implemen-

tation support; (2) plants currently maintain production

records, and can easily add additional records; and (3)

few differences exist between the preliminary and revised

FSIS estimates, suggesting that FSIS, industry, and

outside experts agree on the costs.

Some uncertainty exists about the effectiveness of

microbiological testing.  A review by USDA’s Office of

Risk Assessment and Cost Benefit Analysis

(ORACBA) suggests that the 

E. coli and Salmonella

sampling tests have a low probability of detecting

whether 


E. coli or Salmonella are present on the

carcass.  Additionally, ORACBA suggests that sam-

pling should be based on the incidence of 

Salmonella

within species and species class; is skeptical that 

E.

coli testing can verify a Salmonella reduction; and



believes that not enough information is available to

assess process modification costs (USDA/ORACBA,

1996).

There are also questions about the cost estimates of



process modifications.  FSIS claims that, since many

low-volume producers use bed-kill slaughtering

processes, better training and closer monitoring alone

can be used to meet pathogen reduction goals.

10

However, Dr. David Swerdlow of the CDC indicates



that meat from bed-kill operations tends to have

higher pathogen levels than meat from online process-

ing facilities, suggesting that plants with bed-kill

operations may require more, not fewer, process

modifications than online plants.  Moreover, the costs

of one type of modification, antimicrobial treatments,

may be higher for the bed-kill operations than for the

larger online plants because the treatment must be

applied in a batch rather than in an inline automated

system (Swerdlow, personal communication).

To make a meaningful comparison of benefits and

costs, we also need to estimate the annualized costs

of the FSIS pathogen reduction rule over time (that is,

the present value of costs discounted over 20 years).

Table 6 compares the costs of the initial proposal and

the final rules, annualized over a 20-year period,

starting in 2000 (when all provisions  of the final

HACCP rule become fully effective).

The changes made to the preliminary pathogen

reduction rule appear to have come mainly from

concern about the costs imposed on small plants.

ERS estimated that small plants would have borne

about 45 percent of new regulatory costs, while

10

Bed-kill processing is where small numbers of animals are



slaughtered one at a time in one location, as opposed to assembly-

line slaughter processes.




14

Economic Research Service/USDA

An Economic Assessment of Food Safety Regulations


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