Demand Enhancement through Food-Safety Regulation: A Case Study of the Marketing Order for California Pistachios

T he U.S. pistachio industry, which is located almost exclusively in Califor-nia, has experienced phenomenal growth over the past thirty years. The value of U.S. production of pistachios grew from nearly zero in 1976 to $333 million by 2002. The U.S. share of the rapidly growing global pistachio industry has also increased. Outside California, the main pistachio growing region is the Middle East, including Turkey and particularly Iran. In recent years, a group of California pistachio growers led an initiative to establish a federal marketing order that would mandate quality standards and establish an inspection program to assure consistency in the quality of Cali-fornia pistachios. The main provisions of the marketing order set standards and require testing for quality and for afl atoxin, a cancer-causing mold found in many nuts and grains. Proponents argued that the marketing order would increase consumer confi dence and reduce the chance of an afl atoxin event in the pistachio market, thereby stimulating demand and enhancing consumer benefi ts and producer returns. Hearings were held in 2002. In early 2004, the proposal was supported by more than 90 percent of the growers who voted, and the marketing order is scheduled to take effect in February 2005. This chapter begins with some brief background on the California pista-chio industry and food-safety issues that led to development of the marketing