FROM THE CONSUMER’S FORK TO THE FARM-GATE PRICE

This post first appeared online at http://www.thatsfarming.com on the 8th September 2017

If the consumer pays a premium price for the final product who gains? Where in the supply-chain is the value added? Is it attributable to using higher-quality raw materials and is the raw-material supplier properly rewarded? These questions are frequently asked by Irish farmers, their representatives and the farming press, albeit rarely explicitly so. But how often is a thorough investigation done to ensure that the farmer is properly rewarded?

Farmers believe that whilst they produce the best beef cattle around they do not get properly rewarded. Only this week, Irish butter, that is seen as best in class in Ireland, is selling at a lower price than others. Some are inferring that others are gaining at the farmers’ expense.

Farmers must, however, ask if the end consumer can identify the origins of the final product and do those origins premiumize the product? If they do, why is the added value not transmitted back down the supply-chain? Of course, no traceability of that value added means no farm-gate premium.

The grey area is with industry wide ‘marketing’ schemes. If everyone is certified as having a particular attribute nobody is visibly rewarded price wise in comparison to their neighbour. It is what happens with the quality assurance schemes; they are about market access for most if not quite all Irish produce and they support the broader competitive position. They do not confer a visible premium; something that is now understood, even if reluctantly so, by farmers.

A priority must be to develop products that add value to what is produced on farm and, hence, to premiumize the farm-gate price. Invariably, this means changing on-farm practices. The most obvious example is to operate a certified-as-organic farming system where the produce is identifiable and a premium farm-gate price paid.

The Angus and Hereford beef breed schemes provide another example. They offer a price premium for producing beef sired by breed-registered bulls. Doing so does mean some farming system change. Nonetheless, as the schemes certify sire-only beef, there is little to constrain supply volumes with the result that abundant supply can soon erode premiums. With no farmer control over the supply side within the scheme, the benefits of any retail premium may end up elsewhere.

Recently there has been the approval by the USDA of the Irish grass-fed beef label for use in the US market. It was needed given that a grass-fed definition was already in operation states-side. The parameters for Irish grass-fed beef include: the diet must be more than 80% from grass, the beef is traceable from farm to fork, it is from QA farms, minimum annual grazing period are adhered to, the cattle are raised on family farms and reared without the use of growth hormones. From an Irish beef sales-into-the-USA perspective, this is a significant step forward.

In the interests of transparency though it should be noted that A Greener World which certifies Grass-fed Beef in North America is demanding that the USDA requires labels to clearly specify that it is only 80% grass-fed as existing US labels demand 100% grass-fed and 100% outdoor raised.

From an Irish farming perspective, is the advent of the new Irish grass-fed beef label going to lead to a farm-gate premium for those who supply the beef? Or is the reality that so much Irish beef will qualify under the given criteria that there will, effectively, be no supply constraints and no need for processors to pay a premium? Was the label about selling more Irish beef per se, or was it about designing a designated-origin system from the ground up? Is it a scheme that farmers have to qualify for? Does it have transparent links from fork to farm and the mechanisms to transfer premium consumer-paid prices through to the farmer? The latter is what the Irish beef farmer needs.

Without doubt, Irish meat and milk does come from cattle and sheep that obtain most of their nutrition from grass. Glanbia Ingredients Ireland highlights this with its Truly Grass Fed™ label. Do their milk suppliers gain a premium from supplying the milk for the label or does it provide all suppliers with a higher price than they would otherwise get?

To quote from http://www.trulygrassfed.com: “Truly Grass Fed milk comes from 4,800 farms located in Ireland’s most fertile land. Each farm has an average of 80 cows on approximately 150 acres, which is only about one cow for every two acres. 
Now that’s what we call room to roam… Truly Grass Fed cows dine on a diet of at least 95% grass with a little added clover for nutrition”.

I recently asked if Ireland’s livestock industry should go GMO-free given the cost implications of sourcing and certification. If the farming industry makes such a choice one would expect that farmers would only do so knowing that it would reward them with a farm-gate price premium. It may, therefore, come as a surprise to know that GII is already on the ball and that it already has certified GMO-free status in place. Clearly some in Ireland do recognize the market opportunity that is GMO-free. Do their milk suppliers receive a farm-gate premium for being the foundations of a GMO-free supply chain?

To quote again from the same source: “A core element of the Truly Grass Fed™ offer is non-GMO and we’re now delighted to announce that the products offered under our Truly Grass Fed™ range have been verified by the Non-GMO Project… The Non-GMO Project is a US based non-profit organization committed to preserving and building sources of non-GMO products, educating consumers, and providing verified non-GMO choices. It is North America’s most trusted seal for GMO avoidance for consumers who are concerned about what’s in their food.”

Firstly, is there a separate milk collection system for such milk? Secondly, do milk suppliers have to jump through hoops to supply a scheme? As far as one can see from the website, it applies to all 4800 milk suppliers. Hence, if everyone is involved, everyone benefits from the premium generated by having GMO-free certification. In theory, this is a positive move that responds to a market evolution but will it deliver the full benefits of being GMO-free to the farmer? It is after all they who are operating the farming systems that are GMO-free as per the rules of the certifying body.

As laudable as these schemes are in raising the collective bar, and they show that some are fully aware of the market potential of fully portraying the Irish family farms and their mainly grass-based farming, further schemes must be developed whereby there is an enhanced link between the product’s market-place characteristics and the farm-gate price. Schemes need to be designed from the ground up and in such a way that they deliver a clear market-derived premium to the farmer via an enhanced farm-gate price. Their design must have farmer input and there must be significant farmer control of the schemes and the volumes approved by them. If it is the farmers actions taken on farm that add value, the rewards must go back to the farm. We are very good at talking about farm to fork, but for the farmer it is the reverse that really counts, it is about from fork to farm.

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