Background

The Hazard Analysis Critical Control Point (HACCP) system is widely used in the food industry to prevent food safety hazards or to ensure product quality. During the last few years, it has been mandated by U.S. federal regulation for seafood, meat, poultry, and has been proposed for fruit juice, in an effort to reduce risks from food borne microbial pathogens. Many other industrialized nations have mandated HACCP for part or all of their food industries. Yet little economic research has been conducted to assess how cost effective HACCP may be for improving food safety or how it may affect food markets, consumers, and industry. Both private industry and public agencies need more information about how to integrate risk assessment, cost-benefit analysis, and economic analysis into the HACCP framework.

The NE-165 Regional Research Project, with support from the Farm Foundation, the Food Marketing Policy Center, the University of Illinois, and the University of Massachusetts, organized a conference in June 1998 to provide current information on the economics of HACCP, and to foster communication among universities, public agencies and industry. The call for abstracts in 1997 was widely circulated among scientific communities with an interest in food safety, and yielded a broad range of submissions covering many food industries and countries. The conference was attended by over 130 participants from academia, public agencies, and industry. The participants came from 13 countries, including the developed and developing world. Dr. Catherine Woteki, USDA Undersecretary for Food Safety, gave the opening address.

Conference Overview

The conference papers and discussions covered several emerging issues for economics and agribusiness research related to the use of HACCP in the food industry:

• How can we best evaluate HACCP as a public policy tool to improve food safety? Several papers debated the best approaches to evaluating the public costs and benefits of mandating HACCP; other studies presented ex-post evidence regarding costs and benefits following regulation. The ex-post estimates often differ from the ex-ante impact assessments by public agencies, and provide lessons for future policy analysis.
   
• To what extent are there private incentives to adopt HACCP? Many studies documented the private benefits and incentives that are motivating firms to adopt HACCP or to improve food safety through other means. These were very apparent in the studies of food retailing, where customer contact provides immediacy to such concerns. Other studies emphasized how such incentives are being transmitted through the food chain from consumers to food processors, handlers, and producers.
   
• How can HACCP costs best be modeled as part of the production process? Several papers explored different ways of modeling HACCP costs, choosing among alternative hazard preventions, or incorporating HACCP into a production function framework. Finding appropriate models is important for future economic research.
   
• How can the benefits of HACCP be compared to the costs? Several studies attempted to quantify private and public benefits from HACCP and to link those benefits to costs. The purpose of such comparisons is to find the most cost-effective means of improving food safety. This will continue to be a challenge for HACCP research.

The conference papers also documented and provided further evidence regarding several generalizations about HACCP that have been reported earlier in the economics or agribusiness literature:

• There are economies of scale in HACCP implementation. The large costs of developing and implementing a plan are not scale neutral and will be lower on a per unit basis for larger food processors.
   
• The costs of HACCP include a substantial Ahuman capital@ component in plan development, training of personnel, and on-going monitoring activities. HACCP costs also may include investments in specific processes that require new physical capital and result in additional operating expenses.
   
• Many food industry firms have private market incentives to adopt HACCP or to improve food safety, but these are often difficult to quantify.
   
• HACCP is of growing importance in many countries, in food retailing, and in international food product trade.

Report by Laurian J. Unnevehr, Conference Steering Committee Chair, and Professor of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign.

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