During the Cattlemen’s Profit Roundup at the American Gelbvieh Association (AGA) national convention, Dustin Aherin, AGA board member, shared his insights on market direction and the Gelbvieh and Balancer position within that direction.
“I want to plant a seed for where incentives are coming from,” Aherin told attendees. “When we think about where the pressures have traditionally come from, we often point to consumers first. That isn’t anything new. When we think back to the push for quality, those dollars ultimately came from consumers and were passed down through the supply chain: through the packers, through marketing grids, to cattle producers who increased quality.”
Aherin says that a focus on sustainability is bringing new pressures. Today, the pressure is coming from the government and exists all along the supply chain, with funding allocated by the current administration to ensure that those pressures catalyze beef industry production. Within this structure are other vested groups, many breed associations and nongovernmental organizations.
There are also shareholders looking at the sustainability space as an investment opportunity, and those investors, Aherin says, are interested in directing their dollars toward environment, social and governance (ESG) opportunities.
“There’s a lot of institutional funds—think pensions, for instance—that have set guidelines that stipulate that they will only invest in companies that check the boxes around ESG,” he says.
Aherin also talked about the role lenders are playing in financing sustainability efforts, which he notes is an interest rate opportunity rather than a cutoff of funding at this time.
“One way that the finance industry has started to offer some incentives on the food company side is called ‘sustainability linked financing.’ That’s where certain key performance indicators are linked to better interest rates,” Aherin shares. “At the producer level, we are just starting to see this begin to develop with a push for operations to set a baseline and begin documenting changes and improvements.”
Will it pay?
“If we think about the consumer first, are they going to pay a premium for a product that’s stamped ‘sustainable’? More importantly, is that premium going to be enough to pay for some of the costs and supply chain needed to get it to them? I don’t think we have a clear answer to those questions yet,” he told attendees.
A first of its kind USDA Process Verified Program (PVP), Low Carbon Beef, says that the answer is “yes.” Recent research by the group indicates that 71 percent of consumers expressed they are willing to pay a premium for beef certified as being produced with sustainable methods. The newly approved PVP will allow producers to differentiate and market beef that is raised with reduced greenhouse gas emissions.
The sheer fact that the USDA has approved a program of this type confirms that interest exists from all market stakeholders.
“From January to August 2021, we saw sustainable linked financing reach more than $300 billion globally,” Aherin says. “These dollars are growing fast; around 18 percent of cash inflows into investment funds were targeted towards funds that had some kind of sustainability metric built into them.”
Aherin predicts that many of the incentives for progress within the supply chain are going to come from the targets and goals set by major food companies—a trade-off of sorts, where the reduction in greenhouse gas emissions and improved sustainability don’t necessarily come from the food company itself, but rather from the practices of supply chain partners those companies source ingredients from.
That’s an opportunity for beef producers.
“We’re already good at a lot of these things,” he says. “Have you measured pounds weaned versus pounds exposed? Do you have a breeding plan that is based on marketing goals? Are you (Beef Quality Assurance) certified? So much of this is about just documenting things you are already doing, putting it in writing so there’s a record.”
The majority of the resources used in the beef industry are consumed at the cow-calf level, with around 75 percent of the entire beef industry feed inputs consumed in that sector.
Aherin says that AGA and other breed associations are playing an important role in facilitating the documentation and quantification of many of these important metrics at the cow-calf level.
To really know and understand the total resource use per pound of calf weaned or per pound of beef produced, producers use many metrics, essentially building a funnel of information for each cow in the herd. Those metrics are, more often than not, a story of sustainability.
“We are so good (as a sector) at collecting data—measuring and quantifying—and then using that data to improve cattle through EPDs. Right now, we have an incredible opportunity, and to take advantage of it, we need to step up our game and really focus on some of the traits that have sustainability impacts so we can prove through numbers what we already know,” he says.
Today, the Gelbvieh and Balancer breeds boast the smallest mature cow sizes of all major breeds, unsurpassed fertility and a level of docility that makes the breed family friendly. The breeds hold the pieces needed for both commercial and seedstock producers to put the sustainability puzzle together. If and how operations put that puzzle together is up to them, for now. — Laura Handke, AGA
