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Incentives for Change

Credence Attributes On Farm

What are the on-farm impacts of changing food production systems to deliver additional attributes that are meaningful and valuable to consumers?

Eco labels (credence attributes)

What Did We Do?

Organic, grass-fed, free-range and halal are examples of ‘credence attributes’: a feature of a product that cannot be perceived, but may have environmental, animal welfare, social welfare or cultural benefits. Many consumers are willing to pay more for products with these additional qualities.

If this increased value can be shared along the value chain to increase profitability for farmers and growers, this should motivate changes in land use or land management to deliver the credence attributes.

This research project filled an important gap by investigating the costs and benefits of delivering credence attributes on-farm. Organic, carbon neutral and grass-fed farm systems were selected as the credence attributes to investigate, chosen in collaboration with research stakeholders, rural professionals and farmers.

Using data for ‘average’ DairyNZ System 3 farms in the Waikato and Southland, and for a Class 4 North Island sheep and beef farm, Credence Attributes On-Farm researchers modelled the farm system changes required to deliver pasture-fed, carbon-neutral and organic products. These models also enabled nitrogen and greenhouse gas reductions to be estimated.

How Can The Research Be Used?

  • Farmers can use this research to estimate the profitability increase that may be gained through delivering the three modelled credence attributes. The greatest potential gain is for organic (increase of 42% to 67%) and pasture-fed (increase of 36% to 49%) dairy products. Carbon-neutral products are also more profitable (increase of 11% to 25%).
  • This research also provides an estimate of the environmental benefits of delivering the three credence attributes modelled. Carbon-neutral dairy has the greatest potential to reduce nitrogen leaching (-41% N reduction) and carbon footprint (-11 to -17%), due to imported maize being used for 30% of the feed on the modelled farm. Configuring to organic dairy also reduced nitrogen leaching (-17% to -24%) and carbon footprint (-11% to -20%) on the modelled farm.
  • These results show farmers they can maintain or grow profitability under carbon-neutral scenarios. The gained price premium could help a farmer cover adaptation and offset costs, and maintain or increase profitability. Additionally, a co-benefit of carbon-neutrality is a reduction in on-farm nitrogen leaching by up to 40%. This proves that it is possible to achieve multiple environmental benefits through pursuing the goal of carbon neutrality.
  • Exporters and agri-food marketers can use the meta-analysis (combining the results of 94 other studies) to learn how much more consumers are willing to pay for attributes such as organic dairy. This work showed that, on average, consumers would pay 36% more for organic, 25% more for grass-based and 24% more for “environmentally friendly” products.
  • Beef and dairy exporters should note that these products were associated with a higher price premium for credence attributes compared to lamb. Australasian consumers value red meat products with credence attributes the highest, followed by Asian, European and North American consumers. For dairy products, willingness-to-pay is highest in the Asian market, followed by the EU and the North America.
  • Confirming the existence of price premiums for credence attributes may motivate farmers to make changes to their farming systems, or adopt good management practices and new technologies to meet the expectation of environmental regulation and the increasing demand for food products with credence attributes.
  • This study provides evidence that could assist the NZ government and primary sectors in achieving desired environmental goals while maintaining the economy. The results have been presented to staff from the Ministry for the Environment and other government agencies.

In the Media

New Study shows Profit for Green Dairying

Radio New Zealand, 29 November 2019

The best case scenario delivered carbon neutral dairy products which reduced nitrogen leaching by 42 percent and greenhouse emissions by 20 percent.

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Carbon-neutral dairy a reality

Farmers Weekly, 29 November 2019

Dairy farms can be profitable while becoming carbon-neutral and cutting nitrogen losses but the profit depends on getting a premium for being environmentally friendly, AgResearch work has found.

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Many reports, little action

Farmers Weekly, 29 November 2019

New research proving dairy farms can cut nitrogen and gas losses is welcomed by rural consultants but they say farmers now need strong leadership to help make the required changes.

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Milk could be carbon-neutral now, says new study

Newsroom, 28 November 2019

“We didn’t want to come up with things that nobody would actually do, we tried to operate within the constraints of a realistic situation because we wanted this to be applicable and not a blue sky exercise."

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Reducing GHG Emissions Can Also Cut Nitrogen Leaching on Dairy Farms

Our Land and Water blog, November 2019

New research from the Our Land and Water National Science Challenge shows that producing carbon-neutral dairy products can also decrease nitrogen leaching by 42%.

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Our Land and Water takes on economic and environmental challenges

Irrigation NZ News, Spring 2019 (page 46)

“Organic farming is a high-risk, high-reward system that requires learning and experimentation, and it is not going to be the answer for everyone.”

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Less Nitrogen, Smaller Carbon Footprint, More Profit

Our Land and Water blog, September 2019

When a dairy farm goes organic, new research suggests the farm's nitrogen leaching and carbon footprint will decrease by around 20% – while profits could increase as much as 67%.

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Community Involvement

  • Stakeholders, including rural professionals and farmers, attended a workshop in November 2017 to identify the priority credence attributes to investigate. Carbon neutral and grass-fed farm systems were selected. The workshop also discussed on-farm impacts of producing premium products to deliver environmental, animal welfare and food quality attributes.
  • A second workshop was held in June 2018 to present the results of the modelling back to the stakeholders that helped form the direction of the project, and find out what they thought would be of most value in the second year of the project.
  • In August and September 2018 we held a workshop and a meeting to discuss how to model organic dairy systems and draft an initial model of organic dairy farming.

Team Snapshot

Research Outputs

SUMMARY

The added value of value-add

Gina Lucci, Wei Yang, Stewart Ledgard, Grant Rennie, Geoff Mercer and Michael Wang
Brief synopsis of findings (3 pages)

The economic and environmental opportunities of delivering ‘Pasture-fed’, ‘Carbon neutral’ and ‘Organic’ red meat and dairy products in New Zealand. From this analysis, the added value that offers the greatest potential to deliver both greater returns to the farmer and the greatest environmental benefits is organic dairy. However, it is not going to be the answer for everyone.

PAPERS

Consumer Willingness to Pay Price Premium for Credence Attributes of Livestock Products– A Meta-Analysis

Wei Yang, Alan Renwick
Journal of Agricultural Economics, March 2019

This study conducted a meta-analysis to examine consumers’ willingness to pay (WTP) for different credence attributes of livestock products based on a systematic review of 555 estimates derived from 94 papers reporting WTP. Meta-regression results established the presence of systematic WTP variation associated with types of products, credence attributes (CAs) and locations, yet also indicated that WTP is subject to systematic variation associated with study methodology.

Impact of delivering ‘green’ dairy products on farm in New Zealand

Wei Yang, Grant Rennie, Stewart Ledgard, Geoff Mercer, Gina Lucci
Agricultural Systems, February 2020

This paper aims to explore whether consumers' willingness-to-pay (WTP) a price premium could incentivise dairy farmers to deliver products with credence attributes (CAs) in New Zealand. We first employed a meta-regression analysis to estimate WTP for CAs of dairy products, and then incorporated the WTP estimates into farm system models to estimate the economic and environmental (nitrogen and GHG losses) impacts for the farms. The results showed that price premium ranged from 5.3% to 47.5% for environmentally-friendly dairy products. The economic and environmental outcomes varied for different farm system scenarios. Findings of the study could help inform NZ farmers as to how to adjust their farm systems in response to market signals and thereby potentially gain a price premium.

CONFERENCE PRESENTATIONS

Credence Attributes On Farm

Gina Lucci
Our Land and Water Symposium, August 2019

Video: https://vimeo.com/356111478

The impacts of delivering credence attributes of livestock products

G. Lucci, S. Ledgard, W. Yang, Q. Zhou, G. Rennie, G. Mercer, C. Bezuidenhout
International Conference for Efficient and Sustainable Use of Natural Resources, April 2018

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