Regulations weigh on industryWritten by Saige Albert
With the increasing number of regulations, looking at the effect of policies and laws is important to the survival of the agriculture industry, but Anderson says it isn’t a black-and-white subject, and research on the subject is lacking.
Regulations in the agriculture industry range from farm programs, risk management, conservation and environment issues to international trade, marketing, credit and food safety, among others.
“Either industry asks for some of the regulations, there is established bureaucratic interest in a regulation or one or more segments of society see a need for regulation,” says Anderson. “Regulations are enforced by the market structure we have and some groups of consumers.”
“As economists, we are seeing the cumulative effects of very small regulations build up over time,” he notes. “We are getting to a critical mass of regulations and forces.”
He adds that while ideas may seem good, regulations build up and become burdensome, forcing producers out of business. The industry may be approaching a tipping point where the cost of regulations exceed business viability, so looking at the cost of regulation is important, says Anderson. However, quantifying that number is difficult.
“Paperwork, hassle and time are difficult to quantify. How do you value your time, particularly as a producer?” asks Anderson. “Is that an expense or do you have to work harder for what is left over at the end of the year? In essence, do you accept a lower rate of return because you are spending more time doing the paperwork?”
He further questions whether items such as environmental compliance cost should be listed on financial statements. “Who bears the costs of new regulations, and who gets the benefits?” he continues. “One of our concerns is that production pays all the costs, and someone else gets the other benefits, if there are any.”
“I’m guilty of forgetting that there are benefits,” Anderson comments.
He also adds that determining if the benefits exist or if they outweigh costs is a gray area.
The unintended impacts of various policies and regulations create economic impacts as well.
“In terms of regulations, it is very difficult to reap the benefits unless there is demand growth from consumers, particular on those types of regulations that are of consumer interest,” Anderson says. “There really isn’t a good set of research on what the costs of regulation really are, how they affect the industry and if we see benefits.”