Agriculture Reference
In-Depth Information
practices by hindering the development of different prices for different levels of food
safety. In the past there was never a separate spot-market price for produce grown
with GAPs and produce grown without GAPs, even when imperfect information is
reduced with the use of third-party audits. Perhaps food safety is an inherently differ-
ent quality than other unobserved characteristics. For example, organic production, an
unobserved characteristic, enjoys a price premium over conventional production. But
organic is something beyond and above conventional production. Consumers may feel
that only safe food should be offered and are unwilling to pay extra for that charac-
teristic. Or retailers and food-service buyers may not be willing to pay more for food
produced with more food safety attention.
Advertising product from one producer as being safer may be a risky strategy for
a retailer or food-service fi rm because in most cases it is not actually possible to
guarantee food safety. Retailers often have to change suppliers if there are weather
problems in particular areas. What if that product was produced with less attention to
safety? A retailer or food-service buyer would hardly want to advertise that fact. Also,
advertising differences in safety among sources of a particular produce item may
provide consumers with information that undermines their confi dence in the product
in general, regardless of the food safety claims, especially if consumers never knew
that kind of contamination was possible on produce (Golan and others 2004).
Negative externalities also affect the incentives to adopt additional food safety
practices. Negative externalities occur when one party's production or consumption
choices have a negative impact on another party's well-being. Society as a whole may
demand higher levels of food safety than consumers in grocery stores or food-service
establishments. Of course, in the event of an outbreak of foodborne illness, consumers
are on the front line facing health problems and medical bills, lost days of work, etc.
Everyone along the marketing chain associated with the contaminated product will
face potential costs. Even those not directly associated with contaminated product may
suffer. For example, if a foodborne illness is traced to a particular product, but not a
particular grower, all producers of that food item may feel the effects of decreased
demand, as shown by the drop in shipments and fall in price of fresh bunched spinach
shipments following the FDA announcement in September 2006 (Fig. 22.5). The CDC
and FDA incur substantial costs in tracing back the outbreak to the contaminated
product. They also investigate farm and packinghouse operations and review inspec-
tion results. Some level of government often ends up paying for many of the medical
costs incurred in an outbreak. In their private benefi t-costs analyses, growers do not
consider the benefi ts and costs that others might incur if food safety were improved,
and may, therefore, provide less food safety than society desires.
When there are outbreaks of foodborne illness, other groups in the produce indus-
try, marketing chain, or government may face increased costs and may try to impose
new rules on growers to encourage or force them to implement food safety measures
more in line with society's total demand for food safety. Essentially, the costs of
organizing to bring about the changes have decreased. For example, grower organiza-
tions may put into place voluntary or mandatory practices to reduce the negative
impact of one producer with contaminated produce on other growers of the same
product. The LGMA is an example of this type of response. Retailers and food-service
buyers may require third-party audits showing grower compliance with GAPs and
