The price of sustainable agriculture – the consumer is always right

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Lately, leading analysts agree that in the short term consumers will become ever more demanding towards food sourcing, its impact on the environment and climate change.

It’s actually what is happening even now. The effect of consumers’ concerns is already felt by farmers and their reactions (predominantly thumbs-down, of course) are not delayed.
Growers’ negative attitude towards such a consumers’ whims is quite natural. It stems from the well-known fact that compliance with such increased expectations inevitably affects production costs. However what many still don’t understand are the new opportunities farmers would be given exactly thanks to the rise of these expectations. Or in other words, the new value which could be added to their produce when they meet increasing consumers’ requirements.

So let’s check out the real situation.

No matter whether you work for the end-customer or provide raw materials to the processing industry. The market is (already) forcing you to produce sustainably, environment-friendly, resource-efficiently. Sure enough, today you have to invest more than you did five years ago, and sometimes these investments are really higher.
Other times however, that difference is insignificant. There are even cases like, for instance, that of our IrriGATE technology when the sustainable approach impacts your profit positively by improving the gross margin of the holding thanks to the variable costs you save.

But let us look at the option where your starting costs expand.

Let’s say the increase due to the introduction of a sustainable approach is around 15%. That’s certainly no good. Yet, there is another point of view: imagine that, thanks to that sustainable approach you can apply for a bigger grant or you get the chance to mark your produce with a certificate indicating you’re a sustainable manufacturer. Even if not yet relevant to your specific area of activity, those are the two scenarios that will inevitably occur in the near future, in the EU at least.

  • The first one is well-known.

It brings you net profit which (with a bit of luck) would neutralize additional “sustainable” costs. Typically, it derives from specific regulatory requirements and is generally institutionalized, i.e. it does not allow for too much of improvisation on the part of the individual farmer.

  • More intriguing however is the second scenario.

It is here where the added value comes and it depends only on you, how you would make use of it in order to maximize your profit. It is known that the organic production stamp is a reason to sell a product at prices significantly higher than those of the conventional alternatives. There’s no logic for this market rule not to apply also to sustainable agriculture.

As we already stated, more and more consumers are paying particular attention to the way their food is being sourced.

Such a sign would guarantee its sustainable origin and would be a reason for a premium pricing of that particular food. The introduction of such designations depends on regulators and I hope we’ll see them implemented in the agricultural domain before long. Then, the 15 per cent rise in costs would possibly pay off only due to the fact that your production carries the sign that demonstrates its sustainable sourcing.
Yet given that the consumer is always right, with or without standards, living up to these requirements will soon become an imperative for growers. Otherwise they simply will not be able to sell effectively – be it to processors or end-customers. And as it usually happens, greatest prize goes to the first to embrace the sustainability trend both in their work and in building their image as modern-day farmers, socially and environmentally committed.

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