Sustainable Business Network’s supreme award winner: beef producers must put up (prices) or shut up (shop)
The Taupo farming couple who won the supreme award at this week’s 2015 Sustainable Business Network awards have warned that New Zealand’s commodity meat price model needs to change if farmers are to be able to meet national clean water targets and still make money.
Mike and Sharon Barton from Taupo Beef have developed a premium-price meat brand which allows them to run an economic farm, while meeting New Zealand’s most stringent water catchment quality standards. Their model sees them charge 20%-30% more for their beef than other high quality branded meat producers, allowing them be profitable despite having cut the number of cattle on their farm back to 2004 levels so as not to compromise the quality of the water in Lake Taupo.
Now they have promised to make their sustainability model available to other farmers.
The problem faced by farmers (in a hideously over-simplified form) goes something like this: Beef prices in real terms (adjusted for inflation) have fallen steadily for the last 30 years, and are now around half what they were in the late 1970s. (This graph shows Australian figures, but the New Zealand trend won’t be too different.) As Waikato University agribusiness professor Jacqueline Rowarth suggests, shoppers have become used to cheap food, while believing that prices are going up.
Beef prices are half of 1979 levels, in real terms
At the same time as real food prices are falling, farm costs in real terms have been rising (again, these are Aussie figures).
One solution for farmers against this double whammy has been to raise productivity – mostly by putting more cows on each piece of land.
Productivity in the Australian beef industry
The trouble is, farm intensification can be bad news for water quality. The more cows there are near a stream, the more fertilisers, cow urine, faeces etc flow into that stream. And while most New Zealand rivers are pretty clean by global standards, many are becoming more polluted than we remember them when we were kids, and there’s an increasing drive for them to be protected or cleaned up. However, as Barton argues, if beef (or dairy) prices are low when government or councils introduce stricter water quality standards (as they have said they will) many farmers will face real financial problems.
Mike Barton argues a better option is for farmers to move away from commodity pricing, developing branding and stories based on good environmental stewardship. The changes on the Barton farm, for example, started in 2011 when the Waikato Regional Council, in cooperation with the local community and iwi, introduced stringent standards for the amount of nitrogen allowed to be released into water in the Taupo catchment, in an attempt to protect the lake’s clear waters.
While some farmers were forced to sell up or convert their land to forestry, the Bartons instead reduced the number of cows to 2004 levels, got certified for their water quality, and put their beef prices up.
“We started selling our beef to four high-end restaurants, including Huka Lodge and the Taupo Hilton,” Mike Barton says. “We believed that when visitors went fishing in the lake and saw the clear waters and then read the story of our beef, they would be prepared to pay a premium. The regional council auditing and monitoring meant we could verify our claims.”
The model has worked Barton says. Taupo Beef sells for 20%-30% more than its non-certified competition, and the farm now supplies restaurants and top-end supermarkets in Auckland and Wellington, with export markets on the horizon.
Now they are pushing for other water catchment areas to adopt the same strict water quality measures as Taupo and for other farmers to move to the high price model. He is part of the Food Farms and Freshwater (3F) initiative, which aims to create “transformative change” across New Zealand’s agricultural food supply chain as a way to deliver “swimmable and fishable water”. The way to do that, Barton says, is by introducing tough environmental standards, and auditing processes for all waterways, and then developing a market where farmers get a premium for producing meat that meets those standards.
Ian Proudfoot, KPMG’s top agribusiness specialist globally, agrees that environmental and economic models need to go hand-in-hand if New Zealand is to develop a sustainable farming model.
“Beef has the potential to be the largest single export category for New Zealand,” Proudfoot says. “But to achieve that, we need to create a beautiful story around our grass-fed, hormone-free, sustainably produced meat, which can then command a premium price. Plus we need to make sure that the story is authentic; that we are really doing the right thing for the environment.”
Our ability to charge handsomely for our meat relies not just on complying with the rules, but on going beyond what the legislation requires, he says.
“I believe the discussion around the environment has changed over the last 12-18 months from doing what we are told to do, to doing the right thing because it is right and because there are commercial opportunities.”
A potentially more important threat to New Zealand’s commodity beef production comes from cultured beef, Proudfoot says. Maastricht University professor Mark Post is already producing artificial burgers in the lab, made from muscle cells from a living cow, which are nurtured so they multiply to create muscle tissue.
Post predicts that within 25 years there will be enough cultured beef on the market to make burgers for the whole world – from only 30,000 cows. And that creates a great niche for consumers who want to eat real beef made and will be prepared to pay top dollar for steak from New Zealand cows with a strong environmental story, Proudfoot says.
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