The Taupō Beef Story

AgDialogue member Mike Barton farms sheep and beef on the shores of Lake Taupō. In July this year legislation was passed that caps total nitrogen discharges into Lake Taupō, limiting farmers’ ability to intensify production. In response to this, and in an attempt to increase the returns for meat production, Mike decided to set up Taupō Beef to sell premium, sustainably-produced beef. Mike’s experience offers an insight into the potential for New Zealand farmers to receive a premium price by appealing to sustainability-conscious consumers. Below, we outline the Taupō Beef project, and discuss the challenges and opportunities for farmers looking to increase the value of their output through “green” production.

Taupō Beef

As a result of increasing nutrient runoff from farms (and other sources), in 2011 the Waikato Regional Council (WRC) introduced new regulation to cap and decrease agricultural runoff in the Lake Taupō catchment. Under the new regulation, farmers’ nutrient runoff is capped, and can only increase if farmers purchase allowances from others who decrease their runoff. Consequently, Taupō farmers cannot increase profits by boosting production, as this would require farmers to purchase nutrient discharge allowances. Facing these limits, Mike established Taupō Beef in an attempt to increase profits by improving the prices he receives for his output.

Taupō Beef sells sustainably produced meat to consumers at a premium price.  For the recently completed initial trail period, two Taupō farms supplied the beef to four local restaurants and a retail butcher. Both farms were verified by WRC as sustainable producers meeting the conditions of the new regulation. The restaurants involved included the Huka Lodge and the Bistro Lago Restaurant at the Hilton Taupō. Taupō Beef provided the restaurants with training, and brochures and table cards to communicate the Taupō Beef story to consumers. In return, the restaurants and butcher were asked to charge a premium for Taupō Beef meat. For example, Bistro Lago charged up to $46 for a Taupō Beef eye fillet dish, $7.50 more than a similar, conventionally-sourced dish. This premium was charged to test how willing consumers were to pay extra for sustainably produced meat.

The feedback from the restaurants, butcher, and consumers involved in the trial period was overwhelmingly positive. All restaurants reported that the sustainable local production story resonated with customers. Indeed, three out of the four restaurants reported significant increases in beef meal sales, despite the premium price charged. All restaurants and the butcher wanted to continue with Taupō Beef beyond the trial period. The regional council, the local tourism board, and Lake Water Quality Action Group (a local environmental trust) also vigorously supported the initiative.

While the feedback has been uniformly positive for the Taupō Beef trial, challenges exist. A key issue is Taupō Beef’s small scale.  Mike outlines this in a recent report that assesses the Taupō trial period:

"We will struggle to develop a viable business model until we have achieved greater scale and volume. In order to achieve greater scale and volume, we need to prove to farmers and the (meat) processor that we have a viable business model."

The Taupō Beef trial has been extended for a further 12 months. The hope is to increase the scale of the project, to improve the long-term viability of the business model. Taupō Beef is seeking a single large customer or distributor to assist with this.

Lessons for greenhouse gas emissions

The key conclusion from the Taupō Beef trial was that consumers are willing to spend more on meat that is produced in a way that protects Lake Taupo.  It is difficult to tease out whether this is due to the water quality story or the quality of the beef, and whether the same result would apply outside of the local area. However, the fact that consumers are willing to spend extra to support the sustainable production of food is a promising result. The project also highlighted a number of other lessons for New Zealand farmers looking to increase the value of their output through sustainable production: 

•          Purchasers all along the supply chain were willing to pay extra for ‘green’ production: restaurants and consumers.
•          Consumers who are able to pay a premium for sustainable production often have a good understanding of the environmental issues.
•         Close relationships between farmers, processors, and purchasers are critical to success.
•          Having trustworthy verification of environmental claims is important to consumers.

The trial also demonstrated a number of issues that Mike argues are illustrative of wider problems plaguing the red meat industry. There is a widespread lack of trust between farmers and meat processors: farmers are doubtful that sustained increases in returns can be attained by processors, and in turn, processors are deeply suspicious of farmers, believing that they will change contracts as soon as another player offers them an increased premium. As a result, Mike observes that “the red meat industry is not currently providing returns to beef farmers that can compete with dairying and forestry because of this prevailing short-term ‘cannibalistic’ business model”. This was illustrated during the trial, when a major meat company attempted to sell meat cuts back into the trial restaurants at a substantial discount to the prices Taupō Beef was charging, rather than wait and see if the TaupōBeef approach had the potential to build value for all. Mike concludes that it is this lack of will to work collaboratively, from all players in the meat industry, that is limiting farmer returns. 

The Taupō Beef project shows that at a local scale consumers are willing to pay for sustainably produced food. Whether the same result would apply to an emissions story is not certain, but Taupō Beef certainly demonstrates the potential. The challenges Taupō Beef faced are also illustrative of the challenges that might be faced by farmers looking to sell low-emissions beef. It seems clear that to succeed at growing returns for New Zealand farmers, the whole industry will need to get past its current state of mutual distrust and work together to take advantage of the opportunities.

Thoughts on the Durban UN Climate Change Conference

AgDialogue member Chris Insley is a director of Scion Research and Ngāti Porou Seafoods, executive director of 37 Degrees South,  and is affiliated with Te Whānau a Apanui and Ngāti Porou. Chris recently returned from the United Nations Climate Change Conference in Durban, where he was a member of the New Zealand Government delegation. Here he offers a few thoughts on the meeting, and provides links that summarise the outcome. This post summarises earlier posts from Chris’s blog, which can be found here.

Chris in Durban

Amid all the doomsayers, participants at the UN climate change talks in Durban (South Africa) agreed to a pact that, for the first time, will force all of the world’s biggest polluters to act to slow the pace of global climate change. The deal follows years of failed attempts to impose legally-binding international cuts on emerging economic giants, such as China and India.

While it is only a matter of days since the negotiations have ended, and the details of the new agreement still need to be properly understood and interpreted, I believe that seeing all the countries of the world step up mean that the agreement is a very, very good result.

At Durban there was a very real risk that we would achieve nothing or simply procrastinate about what to do. But doing nothing quite simply was not and is not an option for us or the world. We just don’t have the time to sit around for another 20 years (the amount of time since the last major global agreement on greenhouse gas emissions, the Kyoto protocol, was first signed) while emissions continue to rise at an alarming rate.

Fortunately, two major outcomes were achieved at the meeting:

•         There was a commitment to reduce the effects of global warming, with every country committing to set targets to reduce CO2 emissions; and
•          We now have certainty about who is in and who is out and what the rules are going to be.

No substantive changes to how agriculture will be dealt with were made at the Durban meeting.

Of course in the days, weeks, months and indeed years ahead, the debate will rage on: was it enough or was it too much? The fact is that we now have something - a place to start. There remains an enormous amount of follow-up work to do to interpret at country level exactly what the Durban agreement means and how it will play out country by country. But at least we have a starting point that is committed to by the world at large – from developed economies to developing economies, and from small to large to very large economies. We have far greater certainty.

Links to more information on the Durban deal – 

Wikipedia article

Guardian newspaper article

Economist magazine article

Why do we care about agricultural emissions?

In 2007, agricultural emissions accounted for more than 48% of New Zealand’s total greenhouse gas emissions (Ministry for the Environment, 2009) and 13.5% of global greenhouse gas emissions (IPCC, 2007c). The question of what response will effectively address these emissions is of critical importance to New Zealand and the world. However, ensuring that our response is effective requires us to first ask a different question: why do individuals, communities, companies and government in New Zealand care about agricultural emissions? A recent Motu note by Hugh McDonald and Suzi Kerr responds to this fundamental inquiry; it can be found online here. Its major conclusions are summarised below.

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There are three non-mutually exclusive reasons New Zealanders may want to control agricultural emissions. We may be concerned about the impacts of climate change on New Zealand and the world. We might be motivated to control greenhouse gas emissions due to international pressure and opportunities from others based on their concern about climate change. This international pressure could be felt from two distinct sources: from international organisations and countries, or alternatively, in the form of commercial pressures and opportunities for domestic producers. A third motivation may be that we are interested in complementary goals that can be achieved by targeting agricultural greenhouse gas emissions, such as improving water quality or improving farm efficiency.

The motivations New Zealanders have for addressing agricultural emissions should determine the way that the emissions are addressed; that is, the why should determine the how. Depending on our motivation, we will require our responses to achieve different levels of verifiability or visibility, will have different priorities for technological change, and will focus more or less on communicating internationally. These dimensions are summarised in Table 1.

Table 1: Choosing appropriate responses given our motivations

	Responses
	Visible/Verifiable:	Technology change:	External outreach:
Motivation One: Avoid climate change	Needs to be visible and/or verifiable to the farmer. Needs to be verifiable and visible to New Zealand regulators (if national policy). Effort needs to be visible internationally to encourage others.	Mitigation technologies. Some measurement and monitoring technologies.	Cooperate on mitigation development. Share technologies and knowledge we develop. Actively disseminate knowledge.
Motivation Two: Meet international pressure ·    From countries or international organisations	Must be verifiable by international organisations.	Verifiable mitigation methods.	Demonstrate to international parties that we are meeting commitments.
·    From international consumers/markets	Must be visible to consumers.	Visible mitigation methods. Marketing technologies.	Show effort that is convincing to international consumers.
Motivation Three: Achieve complementary goals	Effect on complementary goals needs to be visible to communities of interest.	Technologies that positively affect our complementary goals.	None unless community of interest is international, e.g. Biodiversity.

When responding to agricultural emissions we also need to ensure that our response is robust to the many different possible futures. While we can control and influence some factors around this issue of agricultural emissions, we have little or no control over other factors , such as the seriousness of the climate problem in the future, the existence and stringency of any binding global agreement, the development of technologies for cheap and effective mitigation, and the global economy and agricultural prices. These will have a large influence on the actual outcome of any agricultural emissions response we make. We need to ensure that whatever responses we choose to make are robust to these many uncertainties; that is, our response will need to be flexible, scalable, effective and low cost.

Our discussion also suggests a few stronger conclusions. If we believe that New Zealand is likely to face a price on carbon emissions in the future, explicit or otherwise, then when making decisions with long-term consequences New Zealanders should focus on responses that will decrease long term global agricultural greenhouse gas emissions while improving global food security. These responses will be characterised by significant international engagement and co-operation, and a focus on mitigation technology development. We will want to develop effective, efficient, socially acceptable ways to control agricultural greenhouse gas emissions so that other countries will emulate us.  The key characteristic of these responses will be integrity; successful responses will focus on long-term global goals, rather than attempting to appeal to international consumers or regulators in the short term.

A second conclusion is also clear: there is an opportunity to broaden the consensus for addressing agricultural emissions by focussing on outcomes other than climate change. New Zealanders are motivated to take actions that will affect agricultural emissions for a wide range of reasons, and not only because they personally care about helping New Zealand meet international emissions commitments or reducing the risk of climate change. For example, many New Zealanders will be more motivated to act to improve local water quality or agricultural profitability. Given that issues such as these can be addressed in a way that will have complementary effects on greenhouse gas emissions, focussing on these issues may be a more effective way to build consensus for action than focussing exclusively on climate change.

The full paper can be found on the Motu website - click here. 

A Farmer's View

Posted on behalf of Sally Lee. Sally farms sheep and beef in West Waikato, is an agricultural consultant, and a member of the AgDialogue group. You can follow what Sally is up to at http://burklee-farm.blogspot.com/

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I accepted the offer of joining the AgDialogue group to broaden my own knowledge on agricultural emissions  and to have some say, if possible, on the future of the ETS on NZ farmers and NZers as a whole. The group is made up of people whom I am beginning to understand more, and who, outside of this group, I would probably never have gotten the opportunity to meet. I hope that this group will be able to inflict some positive change and stimulate understanding of rural concerns to non-rural politicians and others as we progress through this debate.

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As a sheep and beef farmer and a consultant to the pastoral industry, my underlying feeling is that I am opposed to the Emission Trading Scheme (ETS) for NZ agriculture in any shape or form.

With the mass of information in the media about the Emissions Trading Scheme, it is extremely easy to get confused.  My belief it that as it stands now, the ETS is purely a tax on farmers collected at the processor level.  There is absolutely no incentive for farmers to change what they are doing on farm, apart to make the extra margin in their bottom line to pay the tax.  Farmers, as with other NZers, are already paying through the use of fuel and energy. Should we be paying again?

However, I am slowly coming to the realisation that the ETS will exist in some form, although maybe not as we currently know it.  So, what should farmers be doing?

As a hill country farmer, it has been suggested that the solution to our emissions is planting pine trees.  I have seen communities in the past lost forever through the planting of mass areas of pine trees and am a little cynical about the long term solution they offer. Also, as an individual farmer, you still require the upfront capital or a joint venture to turn tree planting into reality, this can be limiting especially after the difficult years we have had as drystock farmers. Also, if we take out large blocks of land, regardless of contour or slope, we will reduce our ‘protein’ production which is currently purchased by NZers and international markets. The result of this could be that, yes, NZ may have reduced its emissions, but this food production will be replaced by some other country (with the accompanying emissions), with no net world emissions decrease.

Instead, I believe that many of the answers to the ETS are about good farming practice and improving efficiency on farm.  The obvious way to reduce emissions is to reduce your stocking rate, however, if this is not managed well it can lead to reduced income, and as farmers we would be no better off. Efficiency can also come in the form of improved lambing and calving percentages, better growth rates, and improved pasture production and utilisation. This is known as Best Practice Management. However, this is not new science/technology and many farmers have still not adapted to this way of farming. Why not?  What do we have to do differently to incentivise change? I recently returned from the first national conference on biological farming systems where there were a number of questions raised as to what role a biological system might have in our emissions.

Also, if we are going to go down this ETS path, then what is the country and the world prepared to pay for our produce?  Farmers can’t keep farming with rising costs and red tape.  With the demise of farmers, there are a number of other consequences that NZ must consider. We might achieve our environmental and financial goals, but this might come at the expense of social sustainability. Other important issues include whether NZ can afford to look at ETS in isolation, or should it be incorporating other issues such as water quality and quantity, ecosystems, carbon footprinting, etc.?

Overall, I feel that NZ farmers should not be targeted. Agriculture contributes a large portion of NZ’s GDP and when agriculture does well, so does the country.  Therefore, I believe that NZ needs to pitch in and deal with the problem as a whole. We as NZ should take the bull by the horns and be a world leader – but we need the support of all, and can’t just target agriculture.

Ag Emissions: What is our Goal?

The AgDialogue group is made up of farmers, Government officials and NGOs united by a desire to ensure New Zealand leads the world in finding solutions to agricultural emissions. I find that being part of this group is a unique opportunity to push past the entrenched rhetoric on climate change and start to find solutions that could really work.

Debating these issues through the media does not seem to be constructive for such an important long term issue, as each side lobs their sound-bites into the battle zone, further entrenching their own positions. This is the worst possible situation for such an important issue. The evidence indicates that climate change requires urgent action, and New Zealand is uniquely placed to lead on a response to agricultural emissions. Adapting to a low emissions world will take time to learn new skills and make the necessary investments, all of which needs to start now. However, without greater certainty no one in their right mind will start to make the necessary changes.

Yet once we agree what we want to achieve, Kiwis are notorious for being able to get on and make it work. The difficult times we faced as a nation in the 1980s pushed us towards some world leading actions on natural resource management (fishing) and agricultural subsidies. Sure, we made some mistakes in implementing the change, and the shift certainly was tough, but the fact that today we have among the strongest farming and fishing sectors in the world is a testament to our resilience, determination and creativity. The difference in the 1980s was that the changes were forced upon us. If we act now, we could lead the world once again and most importantly we could do it on our own terms.

Discussions about what we are trying to achieve, or where we are heading, are all too rare in New Zealand. We are a practical nation, deeply suspicious about concepts and strategies, preferring to focus on what we are going to do. This is great, and is probably the reason we are so successful at solving problems once they become clear. The trouble is that sometimes when the battle is waged over the policies alone, what we are actually trying to achieve is obscured from view.

All our national discussions on climate change have focussed solely on one tool, and a flawed one at that: the Emissions Trading Scheme. Should agriculture be in or out? This narrow line of questioning completely misses the point. Once we have agreed what we are trying to achieve with agricultural emissions, it is simply a matter of working out how to do it. We have shown time and again that if we work together, this bit of the process is easy. Any change always creates winners and losers, but we are a small country, and we can work these things out.

The first tranche of the AgDialogue sessions have focussed very much on what our aim should be, and I am aiming to distil, for discussion, what I have taken from the conversation so far.

Our Vision is that over the next 20 years New Zealand lays the groundwork for having the lowest possible emissions for each amount of food we grow by 2031.

But we aren’t agnostic about how this is achieved. Along the way we also expect that:

Incentives are faced by those that can make a difference to emissions – the point of obligation must be on the farmer, otherwise the charge is merely a tax.

Provide the maximum possible certainty to make long-term investment decisions – we need wide bi-partisan agreement on the way forward so that farmers can start planning and adapting.

Costs are borne by those who cause the greatest impact – we need to make sure that the way we account and charge for emissions actually matches their impact on the environment. It is not clear that this is the case for methane under the approach we have adopted from Kyoto.

Any incentives to reduce emissions actually work – price based systems are not a silver bullet, consideration needs to be given to softer approaches like advice and skills development. There is also little point charging for emissions that can’t yet be reduced; again, the way we currently account for methane is under question here.

The creation of environmental limits is consistent across all areas – we need to be aware of the other environmental constraints that are developing (such as water quality), and ensure that whatever is agreed works in those areas too. In particular the way we deal with nitrous oxide emissions has to dovetail with concerns about nitrogen leaching into rivers. Killing two birds with one stone should be the goal.

Balance long term investments and short term profitability – we want incentives to encourage farmers to prepare for and invest in the long term. This will mean that when the world acts on emissions, we will be in a pole position to benefit. However, this system shouldn’t cause production to move overseas to countries without similar incentives in the short term. Modelling indicates this shouldn’t happen with carbon prices around $25 per tonne (even without free allocation).[1]

Give farmers time to adapt – introduction should be staged to allow farmers time to adapt and minimise social upheaval.

In the 1980s we didn’t have the luxury of time to consider how to act, we simply had to do something. If we don’t begin dealing with emissions now, then we face the risk of another 1980s moment where change is needed immediately, regardless of the side effects and upheaval that may cause. On the other hand if we act now, we have the luxury of taking charge of our own destiny and facing the future on our own terms. This will not be easy, but is far more attractive than putting our head in the sand and hoping for the best.

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[1] http://motu-www.motu.org.nz/wpapers/09_16.pdf

Agricultural Emissions Dialogue - About

This blog has been set up as a forum for discussing agriculture and greenhouse gas emissions with a New Zealand focus. Contributors from a variety of relevant backgrounds -  farming, industry, public policy, and science - will post regularly on a broad range of topics relevant to agricultural emissions. 

Much of the material for the blog will be contributed by members of the AgDialogue group. The AgDialogue group has been established with the aim of ensuring that agricultural emissions are addressed in New Zealand in a way that is robust, effective, efficient and fair. Participants include dairy and sheep and beef farmers, as well as individuals from agriculture support and leadership sectors, Iwi members, and people with expertise in national, regional and sectoral policy - groups as diverse as DairyNZ, Meat Industry Association, Local Government New Zealand, Greenpeace, the NZ Institute and The Morgan Foundation. Each meeting the group is joined by one to three additional participants with fresh perspectives – from sectors, from regional New Zealand, or national experts.

We think that dialogue between the different groups interested in agricultural emissions is essential. As a group, participants have the potential to see things that they could not have seen separately, and there is the potential for genuinely innovative thinking to emerge. The secret is to invite in and draw out the full depth of contributions that each participant brings, and to invest the time to allow the individuals and the group as a whole to develop new capabilities together.

This blog is an attempt to broaden the conversation further, and provide a space for people outside the AgDialogue group to join the conversation. We hope that you join in and contribute by using the comments section to share your own views, ideas and stories. If you have a specific topic that you would like to discuss please get in touch.