WITH consumers showing a willingness to pay more for beef and high livestock prices driving on-farm investment, conditions are ripe for growth in sustainability credentials.
While traits like carbon neutrality, high animal welfare and certain production inputs - or their absence - have the ability to deliver a premium, producers should look at sustainability from a value proposition as opposed to just price.
That was the message from prominent animal protein analyst Angus Gidley-Baird, Rabobank, at the livestock session of this week's Outlook conference, run virtually by the Australian Bureau of Agricultural and Resource Economics and Sciences.
Added value can come in forms outside a price premium, he said.
That includes innovation and productivity gains, improved risk management, access to new markets, supporting access to capital and enhanced brand reputation.
"It's important to look at the whole remit rather than simply saying 'I'm chasing sustainability and I want the consumer to pay for it'," Mr Gidley-Baird said.
ALSO FROM ABARES:
The groundswell towards sustainability in recent years has been intense and minimum requirements are being driven not only by consumers, but by those completely removed from the supply chain, the conference heard.
That was a key difference in sustainability credentials that sets it apart from other premium traits, Mr Gidley-Baird said.
A premium product is price inelastic. It has a value proposition consumers are willing to pay for and some degree of scarcity - the smaller supply creates an imbalance, he explained.
While that is certainly the case with a sustainability label, there is a socialisation of benefits and a community expectation that sets it apart.
"The consumer buying a carbon neutral beef is not only feeding their social concscious but also contributing to a broader community benefit. How far that consumer is willing to extend the premium for that broader benefit is still to be tested," Mr Gidley-Baird said.
"Further, the ability to draw a niche when all operators are moving in that space becomes more difficult. Everyone is managing the extra costs but also sharing in the reward and that is what is occurring in the sustainability space at the moment."
This might explain why premiums for sustainability traits are not always straightforward.
Grass-fed premium mince is currently selling for $20 a kilogram, conventional $13 and organic sits at $26. Yet mince labels now appearing with a sustainability logo are still priced at the $26/kg mark.
New Zealand's Fonterra Milk last year released a carbon zero milk and priced it below some of the company's other branded products.
Enabler
On-farm, technology would be the great enabler of sustainability ambitions, Mr Gidley-Baird said.
"Genomics, nutrition, smart tech, soil management - these things will enable more sustainability trait product to unfold and will deliver cost savings and productivity gains too," he said.
"Management and accounting will also be critical. At the end of the day, if you're putting a label on something it has to come with credible evidence.
"Retail prices for beef have gone up 8 per cent in the past 12 mnths, on top of a similar growth the year before so the conditions are favourable for consumers to reach more for a premium product.
"But economic conditions shift and the first market movers' advantage may erode over time."
So extracting value from sustainability must be viewed from a wider perspective than just a price premium.
For all the big news in beef, sign up below to receive our Red Meat newsletter.