$u$tainability must be economically viable, too

Editor’s Update

By Dave Natzke

The third leg of sustainability – economics – is getting more attention. Are more consumers getting it?

“Sustainability” is like pornography: It’s hard to pin down a single definition, but almost everybody is pretty sure they know it when they see it.

In its narrowest definition, almost all eyes have been on the perceived “green” side of environmental and social issues. And that focus has paid “green” for some companies, marketers and producers who have been able to form consumer perceptions.

How much? As I regularly report, one need only check out the American Farm Bureau Federation’s latest quarterly Marketbasket Survey. In that survey, shoppers in 32 states reported paying $2.06 per half gallon of regular milk ($3.06 for a full gallon), but substantially more for what some perceive as more “sustainable.”

A half gallon of “rbST-free” milk was $3.38, about 65% higher than regular milk, with the retail markup equal to about $30.69/cwt. (That’s not the price; it’s the markup.) Organic milk, at $3.65 per half gallon, was about 80% higher than regular milk.

It’s not just milk. According to Farm Bureau’s survey, the average price for a dozen regular eggs was $1.53; the average price for a dozen “cage-free” eggs was $2.91, about 90% more than regular eggs.

How much of that markup is returned to producers? I’m no poultry expert, but in the dairy case, not much.

Producer viability

The third leg of “sustainability” is gaining attention, as more people recognize if sustainability isn’t economically viable, it probably isn’t, well, sustainable.

Earlier this summer, crop protection company BASF hosted a media summit to address what it called a “A Grounded Approach to Agricultural Sustainability.” Among the presentations, BASF reported results of a survey it commissioned regarding farmland stewardship issues. The survey results exhibited some gaps – and some surprising similarities – between consumers and growers.

• Consumers believe organically grown food is safest; growers think conventionally grown food is significantly safer than consumers do. Growers had the same opinions of conventional and organic food in terms of safety.

• Both consumers and growers believe farmland stewardship practices are better now than 10 years ago, and both agree practices will improve in the next 10 years.

• When buying crop inputs, growers place the most importance on product effectiveness. Consumers also think growers place significant importance on environmental impact.

• Consumers actually trusted chemical companies more than growers did.

“Consumers feel good about advances the agricultural industry has made, and are asking growers to continue to place importance on environmental impacts,” said Paul Rea, vice president of BASF U.S. Crop Operations. “In the end, it comes down to consumers having trust in growers, both to provide a safe food supply and to have minimal impact on our environment.”

According to Peter Eckes, president of BASF Plant Sciences, sustainability is a complex topic as agriculture strives to produce more food to meet the needs of a growing population, while using less acreage, water and energy – all while trying to stay profitable.

“Growers are often in the middle of actions by policy makers and the marketing chain, facing unintended consequences,” he said.

Of course, if you’re a crop input company, that’s what you’re expected to say. But Robert Thompson, former University of Illinois Urbana-Champaign ag policy chair, agreed, warning “sustainability” mandates eliminating use of modern technologies are short-sighted and misguided.

“Ag research will be critical to productivity growth,” Thompson said. “By 2050, food production must double. We could double acreage, with a huge environmental impact. About 70% of all fresh water is already used for agriculture, so that can’t be doubled. So we have to triple the ‘crop per drop’.”

Consumers are still evolving, wanting the fundamentals of quality, value and price, Thompson said. Most don’t understand sustainability; about 10% say they make purchasing decisions based on their perception of sustainability, he said.

Mike Geske, a Matthews, Mo. corn grower and National Corn Growers Association board member, said “sustainability” has been part of his business since he began farming. “Lower inputs are a moral imperative,” he said.

So is communication. “There is a lot of fragmentation,” Geske said. “There needs to be better dialogue, and industry must be better organized on public policy and education efforts.”

Dr. Jeffrey D. Armstrong, dean of Michigan State University’s College of Agriculture and Natural Resources, said ecological, social, cultural and economic factors must be addressed in a holistic fashion. He said human capital development is critical, and that the “sustainability discussion” must move to the “pre-competitive” state.

“Activists and some NGOs take a political/emotional approach for their version of sustainability,” he said. “The academic community must communicate better on a science-based approach.” He said public funding for agricultural sustainability is woefully short, and ag productivity growth has slowed in the last decade as the United States falls behind in pubic research.

“Just educating consumers isn’t going to get us out of this,” Armstrong said. “Consumers ‘vote’ on small bits of information, often based on perception. All aspects of sustainability should be taught in schools.”

That includes adequate economic returns to producers. “Margins don’t allow full adoption of sustainability,” Armstrong said.

“Consumers still want variety and choice, but they also want information on production practices,” said Terry Uhling, senior vice president, J. R. Simplot Co. “Consumers remain diverse, so we can’t paint them with a one brush. Economics, cost, safety, instantaneous convenience are changing the ‘face’ of the dinner table.”

As multi-national companies strive for product consistency, global “sustainability” standards will result, Uhling said.

J.P. Ruiz-Funes, senior vice president of corporate strategy and business development for Land O’Lakes, said the link of sustainability and productivity must be emphasized, and increased productivity must be the pillar of the message. He credited the Gates Foundation and others with helping lead to a resurgence of education to convert subsistence farming to commercial farming in developing countries. But while he is encouraged by funding for global food production research, the liveliehood of farmers must be addressed.

“Sustainability is the business of the business,” said Ruiz-Funes. “Environmental sustainability means we have to feed more people with smaller impacts on resources. One means to do that is through development of farmers in other countries.”

Roger Thurow, former correspondent of The Wall Street Journal and co-author of “Enough: Why the World’s Poorest Starve in an Age of Plenty,” offered a final perspective. He said food production will need to double by 2050 to meet growing population/prosperity needs.

“There are 1 billion people chronically hungry now, equal to 16% of the world’s population,” he said, urging people to become “outraged.” “People are dying from criminal negligence; starvation is the disease of the soul.”

Measuring ‘sustainability’

Nevin McDougall, senior vice president, BASF Crop Protection/North America, said “sustainability” may add business risks, and requires improved communication. Unfortunately, new technologies and science are not easily communicated. He warned private industry must avoid an “arrogant” stance regarding sustainability, instead developing transparent tools to measure their environmental impact.

BASF unveiled a new Eco-Efficiency Analysis tool – still in the development stages – which compares the social, economic and environmental profiles of products and production methods for use in on-farm management decisions. The tool could, for example, calculate a pesticide application’s impact on water or fuel usage, other input costs and crop yield, assigning an overall “sustainability score” to the product. It takes the product’s entire life cycle into account, from raw materials sourcing, to product manufacture, use and disposal.

Theoretically, the score would not only help growers tailor cropping systems to maximize profitability, but could also follow a crop all the way through the food/feed value chain, useful for marketers and consumers who make purchasing decisions based on “sustainability” issues.

FYI

For more information about the summit and to listen to a recording of the general session, visit http://www.agro.basf.com/agr/AP-Internet/en/content/news_room/press_conference/2010-basf-agricultural-solutions-media-summit.

To offer your own opinion or response, e-mail Dave Natzke, national editorial director, DairyBusiness Communications, e-mail: dnatzke@dairybusiness.com.


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