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ERS examines how private markets and government regulation have combined to provide meat and poultry food safety. USDA is responsible for regulating these products. ERS covers three principal areas:
- Private market mechanisms that control food safety
- Regulation establishing a minimum level of meat and poultry food safety quality
- Innovation enhancing meat and poultry food safety
The other main federal regulatory agencies are:
- Food and Drug Administration (FDA) for domestic and imported food, except meat and poultry
- Environmental Protection Agency (EPA) for meat, poultry, toxic substances and wastes.
ERS also conducts economic research on fresh fruits and vegetables, which fall under FDA jurisdiction.
Private Market Mechanisms: Meat and Poultry
Firms invest financial and human resources to prevent microbial pathogens, carcinogenic chemicals, and other harmful substances from entering their food products. The level of food safety provided depends upon:
- customers’ demand for food safety
- fear of losing a reputation as a safe food provider
- contractual requirements with customers and suppliers
- fear of lawsuits arising from the sale of contaminated products
- State, local, and federal government regulatory requirements
- firms’ capacity to provide the food safety practices and technologies necessary to meet those demands.
For some firms, this means investing just enough to satisfy regulatory requirements, but many others choose an investment level that exceeds the regulated standard.
Costs. Costs play a major role in what level of food safety a company chooses. In Meat and Poultry Plants' Food Safety Investments: Survey Findings, ERS researchers showed that, relative to small plants, large cattle-slaughter plants made more extensive use of food safety equipment, testing, and dehiding practices and had nearly the same levels of sophistication as small plants in sanitation and operating practices. These choices occur because steam pasteurization systems and other food-safety-control equipment may cost more than $1 million, making them impractical for all but the largest plants. Manual operations required for cleaning, on the other hand, have similar costs per head of cattle across plants, making them viable for all plants. The cost advantage for large plants in funding food-safety equipment does not mean that they provide meat and poultry with higher food safety quality. Production lines at small plants are much slower, giving workers more opportunity to avoid processing mistakes that lead to product contamination. Careful hide removal had the highest payoff in a case study (see Malcolm, Scott A., Claire A. Narrod, Tanya Roberts, and Michael Ollinger. “Evaluating the Economic Effectiveness of Pathogen Reduction Technologies in Cattle Slaughter Plants,” Agribusiness 20(1):109-123, 2004).
High-profile cases of foodborne illness have caused big drops in sales of agricultural products, causing some firms to go out of business. This threat of lost sales has led to market-driven efforts to provide safe food. Major buyers of food products, such as large fast-food chains and retail buyers, impose stringent food safety process control standards on their customers.
Independent of those major buyers, firms have made organizational changes such as vertical integration and have turned to new food-safety-control technologies as ways to control pathogens and maintain their reputations for food safety quality (see "New Pathogen Tests Trigger Food Safety Innovations"). International markets have also influenced producer behavior (see Product Liability and Microbial Foodborne Illness and The Economics of Food Safety: The Case of Green Onions and Hepatitis A Outbreaks).
Government Regulation. The Government has also intervened to ensure food safety. USDA’s Food Safety and Inspection Service (FSIS) promulgated the pathogen reduction hazard analysis critical control point (PR/HACCP) rule in 1996. An overview of the costs of this regulation is provided in Meat and Poultry Plants' Food Safety Investments: Survey Findings. For a discussion of U.S. food safety regulation and a preliminary assessment of the costs of regulation, see Managing for Safer Food: The Economics of Sanitational Process Controls in Meat and Poultry Plants.
Companies place a high value on maintaining their reputations for producing safe products. The strength of the incentive depends on the level of food safety demanded by customers and the ability of those customers to link products purchased to vendors. Eating pattern data can be used to link the food to a vendor. The vendor, in turn, can link the food to a supplier. However, linkages are seldom made from an outbreak investigation because it can take 3-5 days to develop symptoms and other foods would have been eaten over that time. This incomplete information diminishes the incentive to maintain food safety.
Legal Cases. In Product Liability and Microbial Foodborne Illness, ERS researchers point out that many legal cases involving foodborne illness injuries never go forward and, of those that do, only one-third of all plaintiffs received jury awards. Aside from litigation costs, a reputation for unsatisfactory food safety quality can cause a company to go out of business and an industry to lose sales. Hudson Meats, for example, was forced out of the industry after being implicated for selling contaminated meat products. Mexican green-onion exporters suffered a decline in sales after U.S. food authorities traced a hepatitis outbreak to their products, and U.S spinach producers experienced a complete loss of sales when FDA advised consumers to stop eating fresh and bagged spinach in the wake of an outbreak in fall 2006 due to E. coli contamination.
Major customers of food products such as fast-food restaurants, retail buyers, and international buyers have substantial control over food-safety processes. These buyers impose stricter standards than those demanded by regulatory bodies. The result is more extensive use of food safety equipment and intensive sanitation and operating practices (Meat and Poultry Plants' Food Safety Investments: Survey Findings).
In the Food Safety Technologies and HACCP Compliance Survey, ERS identified the level of use of numerous food safety technologies used to control pathogens. More recent surveys conducted by the Food Safety Inspection Service are available at Survey of Meat and Poultry Processing-Only Plants and Survey of Meat and Poultry Slaughter and Processing Plants.
Regulation Establishes a Minimum Level of Meat and Poultry Food Safety Quality
USDA's Food Safety Inspection Service (FSIS) has regulated meat and poultry processing for more than a century. As described in Managing for Safer Food: The Economics of Sanitation and Process Controls in Meat and Poultry Plants, the centerpiece of U.S. meat and poultry food safety regulation is the 1996 pathogen reduction/hazard analysis critical control point rule. This regulation:
- requires all meat and poultry establishments to develop and implement written sanitation standard operating procedures (SSOPs).
- mandates generic E. coli testing by slaughter plants.
- establishes pathogen reduction performance standards for Salmonella that slaughter establishments and raw ground meat producers must meet.
- requires all meat and poultry establishments to develop and implement a HACCP program.
The goals of this regulation were to shift more responsibility for food safety to private markets by requiring producers to implement and maintain their own HACCP program, introduce a performance-based standard to which plants must adhere, and compel producers of raw products to test products to verify the integrity of their food safety process control systems. Food safety performance standards for meat and poultry are based on allowable levels of pathogens. Regulators monitor performance but do not specify how producers meet those tolerances. Performance is based strictly on whether the producer meets the standard.
Recent estimates of a 50-percent reduction in contamination by E. coli O157:H7 over 2000-03, current estimates of the cost of the same pathogen of roughly $400 million per year, and estimates of compliance with HACCP regulation of about $310 million per year for beef products suggests that public health benefits approximately equal HACCP costs in beef slaughter. No recent research has considered the impact of all illnesses from other products.
In Economic Assessment of Food Safety Regulations: The New Approach to Meat and Poultry Inspection, a pre-regulation benefit/cost analysis of four pathogens estimated that public-health protection benefits (if illnesses were reduced by 17 percent or more) exceed industry compliance costs. Both the benefits and costs may have been understated. The health costs excluded some of the costs of lifetime complications due to foodborne illness. Recent estimates suggest that the industry cost of compliance is much higher. The original estimated cost was $1 billion to $1.2 billion over 20 years while recent estimates suggest yearly costs of $380 million and a fixed cost of $570 million. Additionally, the research shows that compliance costs were three to eight times greater for small slaughter plants (lowest quintile by size) relative the larger plants (highest quintile by size).
The PR/HACCP rule is not the only meat and poultry food safety regulation. FSIS regulations enforce zero limits for two deadly pathogens—Listeria monocytogenes in ready-to-eat meat and poultry and E. coli O157:H7 in ground beef. FSIS, along with various State and Federal officials, monitors meat and poultry for these and other harmful pathogens. If one of the agencies determines that meat or poultry is contaminated, a firm might be asked to recall its products. This is not mandatory but a firm that does not recall its products may have to face an onslaught of bad publicity. No firm has refused to conduct a recall after being asked to do so. ERS is now conducting research on the effect of food recalls on plant performance to assess the effectiveness of recalls in encouraging better food-safety process control.
Innovation Enhances Meat and Poultry Food Safety
Producers may be motivated to adopt food-safety innovations if offered incentives such as higher prices and less stringent regulatory oversight and disincentives such as lost sales contracts and regulatory fines. Innovations can occur at any link in the supply chain, although the greatest economic incentives are generally on the consumer end, because at that stage it is easier to trace contaminated products back to the supplier.
 Recent food-safety innovations. Major changes in pathogen testing technologies have lowered food safety information costs, giving industry and regulators a clearer understanding of the level of food safety and encouraging greater food-safety-control effort (see “New Pathogen Tests Trigger Food Safety Innovations”). Other important innovations include equipment that steam-pasteurizes beef carcasses and supply-chain management and pathogen testing systems to control foodborne pathogens in hamburger patties (see “Food Safety Innovation in the United States: Evidence from the Meat Industry”).
Innovations can be as simple as work practices that minimize opportunities for product contamination. Processing plants can greatly improve pathogen control through strict sanitation and process control. For example, running conveyor belts during sanitation procedures and sanitizing hand tools after each cut of meat or poultry greatly reduce cross-contamination.
Assigning production workers responsibility for food-safety decisions has likewise improved food safety. The report, Meat and Poultry Plants' Food Safety Investments: Survey Findings analyzed 2001 survey results for meat and poultry plants on innovative plant technologies and their costs. While innovation is costly, its benefits include long-term production contracts, higher prices for output, and longer shelf-life for products . Perhaps most importantly, food-safety innovations reduce the likelihood of a firm or plant losing its reputation for food safety, and eventually going out of business.
Domestic and international regulators increasingly use
risk-assessment models to assist in setting priorities
and standards for foodborne pathogens. The models range
from identifying and ranking consumption of high-risk
foods to detailed farm-to-table models of how risk may
change at various stages of the supply chain for a particular
pathogen-food combination. A U.S. model of practices
in beef slaughterhouses found that improvements in hide
removal make the most important contributions to reducing
the risk of generic E.
coli contamination.
Economic analysis of this model found that careful hide
removal in cattle slaughter plants is more cost-beneficial
than irradiation, costing 5-10 cents per carcass for
large slaughter plants. (See Malcolm, Scott A., Clare A. Narrod, Tanya Roberts, and Michael Ollinger. 2004. “Evaluating the Economic Effectiveness of Pathogen Reduction Technologies in Cattle Slaughter Plants,” Agribusiness, vol. 20 (1), pp. 109-123.)
Food-safety and trade benefits are the twin goals of a constantly evolving international network of multilateral coordination (such as harmonization), private system approaches (HACCP systems), and trade negotiations (such as the World Trade organization’s Uruguay Round, 1986-1994, which resulted in the agreement on sanitary and phytosanitary measures).
Some food-safety policies can be significant barriers to international trade and are often seen by other countries as shielding domestic producers from competition. Such perceptions cause friction among regulators and trading partners. In a recent survey on technical barriers to trade, USDA's foreign representatives asserted that food-safety barriers accounted for a fourth of existing barriers and for half of the estimated export revenue losses because these barriers often restrict sales of high-valued products, such as processed foods and meats.
Food Safety: Fresh Fruit and Vegetables
 The U.S. Food and Drug Administration (FDA) oversees food safety for fresh fruit and vegetables. After several large outbreaks of foodborne illnesses in the mid-1990s, traced to California lettuce and Guatemalan raspberries, FDA started to focus on the potential for microbial contamination of fresh produce at the farm level. In 1998, FDA published its voluntary guidelines for good agricultural practices (GAPs) to reduce microbial contamination. FDA acknowledges that with current technology it is possible to reduce, but not eliminate, the risk of microbial contamination. These voluntary guidelines are used by many U.S. and foreign producers growing for the U.S. market. GAPs are general guidelines that can be used for any fresh fruit or vegetable.
For growers, adopting GAPs has benefits and costs. When there is an outbreak traced to a particular commodity, all growers face reduced consumer demand, even if the outbreak is not traced to their operation. Farmers with GAPs can reduce their losses in such a case. In the 2003 hepatitis A outbreak associated with green onions imported from Mexico, growers with GAPs and third-party audits of their status suffered fewer losses than other Mexican growers who could not easily show buyers that they took food-safety precautions.
Another important benefit of adopting GAPs is that many retail and foodservice buyers now require that their growers show compliance with GAPs. These buyers also may demand food-safety practices that exceed the GAP guidelines. Growers receive wider market access with GAPs, but not necessarily higher prices. While produce of different sizes and observable quality differences have different prices, price differentials for produce grown with different food safety practices have not emerged. Consumers cannot observe food safety, and growers can use GAPs but cannot guarantee a product’s safety. Under these conditions, retailers and food service buyers may be wary of advertising claims that some produce is safer and merits higher prices.
 On the cost side, the investment required to adopt GAPs may be quite large and immediate. Smaller growers may have a harder time adopting GAPs, leading to a structural impact on the industry. The only survey on adoption of GAPs for produce sold in the United States is one of Mexican green-onion growers showing that about 70 percent of growers had already adopted GAPs or were in the process of doing so.
Although FDA has relied on voluntary guidelines, it could always decide to make food-safety practices mandatory. In 2004, FDA encouraged five commodity groups (lettuce, tomatoes, green onions, cantaloup, and herbs) with a history of contamination problems to develop commodity-specific GAPs that would further refine the important food-safety practices for their commodities.
With increased traceback capabilities, more outbreaks are likely to be traced to particular commodities and producers. One producer with a problem can have a negative impact on all growers of that commodity. Several commodity grower groups are considering plans to mandate certain food-safety practices to protect the industry from growers who may underinvest in food safety.
After the 2006 foodborne-illness outbreak associated with California spinach, growers initiated the California Leafy Green Products Handler Marketing Agreement. Nearly all California leafy green handlers voluntarily agreed to sell only from growers who adhere to new food-safety standards, or best practices, for California-grown product. Growers are certified by field audits as to their compliance.
Unlike GAPs, the new standards define specific criteria and target values for control and monitoring. In the original GAP document warning farmers that “water quality should be adequate for its intended use,” FDA was justifiably reluctant to specify a threshold for water quality because it lacked data to support specific thresholds. The new best practices are more specific; for example, the new standards require well water to be tested before production begins and monthly during the production season. Specific tests are recommended for measuring levels of generic E. coli in water and an action plan will be implemented if counts reach certain numerical thresholds.
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