Dispatches from Roundtable on Responsible Soy's (RTRS) conference, RT13, in Lille

Putting a price on soy? Industry chews over how sustainability costs should be shared

By Kacey Culliney

- Last updated on GMT

Putting a price on soy? Industry chews over how sustainability costs should be shared
Feed makers and soy producers want the cost of sustainable soy to be shared and absorbed by the entire supply chain, but how much should each player pay and how could it be managed?

These were some of the questions amongst the 180 attendees at the Roundtable on Responsible Soy's (RTRS) annual, two-day conference in Lille last week, as industry members discussed how to bring sustainable soy out of its niche and into the mass market. 

Global soybean production reached 336.7m tons in 2017/18, according the US Department of Agriculture (USDA)​, of which, 299.4m tons went into animal feed. But within the global market, just 1-2% of soybean is certified sustainable and in 2017 only 2.2m tons of RTRS-certified soy was traded.  

Marina Born, president of the RTRS, in her opening remarks at the conference in Lille with a nod to this, saying that whilst there had been “continuous, aggressive growth”​ of RTRS certified soy production – around a 30% increase in the last year – demand still had a way to go. 

Addressing conference attendees just after the RTRS president, Jonathon Porritt, founder and director of Forum for the Future – a UK charity and NGO specialized in promoting sustainable development – said: “Thebiggest blocker for 100%, genuinely sustainable soybeans, across the global economy, (…) is the absolute insistence on cheap meat.”​ 

Jonathon_Porritt_RTRS defo
Jonathon Porritt, founder and director, Forum for the Future, speaking at RT13 in Lille, France last week

Costs across all meat categories were being driven down so governments, retailers, and manufacturers, he said, could tell consumers they were doing the 'best possible job' to bring cheap meat to the market. 

“I'm honestly not sure in a world where cheap meat is seen to be more important than a sustainable future, that RTRS will ever be able to deliver on some of its ambitions,” ​Porritt said. 

Currently, RTRS certified soy can be purchased directly through an RTRS 'Certification in the Chain of Custody' that ensures full traceability on the commodity or companies can purchase 'credits'. In the credit scheme, the RTRS grant one credit for every ton of sustainable soy to producers that can be traded or 'exchanged' on the RTRS Credit Trading Platform. Any company or organization can purchase these credits as a way of showing a commitment towards sustainable production and then make public claims that they supported responsible production. 

'It's huge when it's only supported by one'

So, if retailers and manufacturers weren't going to adjust meat prices to absorb incremental costs, who would?

Speaking to FeedNavigator, Christophe Callu Mérite, protein purchaser at Feed Alliance and RTRS executive board member, said it couldn't be feed manufacturers alone.

“The cost is, roughly, less than a percentage of the cost of a ton of soy. Sustainable certification created a market of $2-3 per ton. It's not a big issue (…) but it's huge when it's only supported by one who is the weakest link and the weakest link is the feed industry because they work with big volumes for an average return of 1%,”​ Callu Mérite said. “They have the tiniest possible margins within the supply chain, so they cannot absorb it all. It's always the case – you have big brands and retail who want to be sustainable but when the costs come, well.”

C Callu Merite
Christophe Callu Mérite, protein purchaser at Feed Alliance and RTRS executive board member, debates the issues at RT13

He said part of the reason retailers didn't want to pay was a lack of understanding of a “very complex” ​supply chain. ​But to give sustainable soy a viable future, he said incremental costs had to be shared.

“If it's shared, it's nothing; it's peanuts​.” 

Addressing attendees at a parallel session on supply and demand at the RT13 conference, Jose Villalon, corporate sustainability director at Nutreco, said to achieve this industry would have to work in new ways.

“Perhaps a way to approach this then, for example, is pork producers and salesmen sit at the table with the retail buyer and instead of selling one-on-one, he approaches that table with his pork farmer, his feed manufacturer and with the crusher – the entire soy value chain. And then with an open book of cost and concepts, they sit down and say 'this is what it's going to cost for sustainable soy',” ​Villalon said.

This way, he said “back-to-back contracts” ​were established which meant every part of the supply chain could feel confident investing and working with sustainable soy.

'Make it an obligation at a government level'

One Argentinian soy producer at the same parallel session raised her concerns around cost, stating her company had a surplus of RTRS credits they couldn't sell.

“We are carrying the costs; we are carrying the cost of sustainability and we do not see the other actors in the value chain taking on the same burden,” ​she told attendees present at the session.

However, Callu Mérite said shared cost collection could also happen via an independent, highly-engaged organization or association. 

“It could be through the RTRS itself, a UN organization of any kind, it could be under a UN compact – we have to be inventive. A solution is not there right now but we don't have to fear the fact a solution is not there because the calculation is really easy to do. It just takes one brand saying 'I want to share the cost with my upstream', which is food, who will share with feed. The only question is who collects all that?”

But what sorts of percentages should each member of the supply chain pay? Should it be a fair split? 

Marina Born
Marina Born, president of the RTRS, at Lille event

'You can't divide it by five'

Callu Mérite said: “We are creating a new world. If you start saying 'this one is rich, this one is poor' you go back to the old ideas and the old discussion. It's a bit like politics. So, I guess I would take a more simple approach where four or five in the stream for soy share equally. ...If it is absorbed by everyone no-one can say the main block is competition.”

However, Jochem Bouwmeester, director and banker in the food and agri space at Rabobank, said it didn't seem fair to simply split costs.

“The costs are at the farm: it's about soil use, good labor practice, things like how you process waste, pesticides, plastic cans. All that costs money to organize and to get certified. So, sustainable farming or farming via a certification is more expensive than the normal farming.”

“...It boils down to making agreements with each other whereby we make a sort of estimate on how much cost you allocate to the different steps in the supply chain. And how can we possibly agree on how much the farmer would pay, the crusher, the trader, the food producer and the retailer? (...) You can't divide it by five because of the fact a food retailer earns more profit on every euro sold, compared to farmers,”​ Bouwmeester said.

At the moment, the costs were either being absorbed by the farmers and producers of soy, if credits weren't purchased, and by the feed industry if they were.

However, at this stage he said it was unhelpful to focus too much on the particularities of shared cost considerations because that wasn't the most important part of the conversation amidst wavering demand.

“It's very easy to hide behind the argument. It's very easy for people to say they don't want to bear to costs because that kills the discussion. The discussion needs to, instead, go into the question 'how can we sustain ourselves, not now, but in like ten years?'”

And that, he said, had to involve the entire supply chain right through to the end consumer.

Consumers – to push or not to push?

 “It's a two-way approach, we can't rule out the consumer,” ​Bouwmeester said. “...I believe consumers would probably pay.”

The example of dairy in the Netherlands, he said, where it was an obligation to feed all cows with RTRS soy, showed prices hadn't been driven up beyond consumer means or willingness.

Callu Mérite said there was a “new generation”​ taking charge who were becoming more and more involved in sustainability. “You can breathe sustainability when you go to the Netherlands; the Dutch society is embedded in that.”

And while he said this wasn't the case for all of Europe, nor the world, he remained optimistic about sustainability as a whole because it was now on the agenda of regular consumers, not just NGOs.

However, Porritt said a focus on corporate leadership would have more power than a focus on consumers because no sustainable efforts could truly be delivered on without an associated leadership push.

“Don't put too many eggs in the basket labeled 'consumer awareness'. Most of this stuff is too complicated. Most consumers, and this is controversial, are too indifferent. And connecting the reality of what we're talking about – genuinely sustainable agronomic systems – with what the consumer wants is really difficult.

"Start more realistically from the end point. The global consumers are the unknowing beneficiaries of everything you do, rather than the drivers of the change that is necessary.”

Related topics: Regulation

Related news

Show more

Follow us

Products

View more

Webinars