Ellen Goddard is an agricultural economist at the University of Alberta.
Humane beef has been in the news recently – but what has not been the prime focus is the economics of that product. Meat sold as certified by a particular system (Certified Humane, Canada Organic, SPCA Certified) is not necessarily produced from animals treated more humanely than those whose meat comes without a certification. What it does mean is that the producer is audited and certified by a "third party" to be producing to particular guidelines that are publicly accessible. For producers, this means more record keeping, adherence to a set of rules and participation in an audit on some regular time line.
These things clearly add cost for producers and possibly for their buyers. So consumers will undoubtedly pay more.
Sobey's Inc. has been using Certified Humane meats since late 2013. This has generated interest in this particular certification program from processors and producers, increasing the supply of Certified Humane products in Canada. This interest comes because of multiple economic factors: the ability of the producer to have long-term, assured contracts that provide stability, and a price that covers the costs of the certification processes. From the buyer's end, they are removing uncertainty in the eyes of their consumers about standards associated with animal welfare. The consumer knows someone is checking and verifying certain animal-welfare standards even if they are not completely clear about what exactly those standards are.
For this certainty, they are willing to pay some amount and perhaps avoid the vague guilt they otherwise feel whenever they hear about an incident of terrible animal treatment.
But price is always crucial in food-purchase decisions.
Are all consumers in Canada willing to pay extra for programs such as Certified Humane? Absolutely not. For many of us, food prices are a high cost and we are going to maximize our food budget through buying the lowest-priced products we can find.
Research done here at the University of Alberta and elsewhere shows two things: Higher income levels are a good indicator of a willingness to pay higher prices for identified animal-welfare characteristics, and everyone strongly prefers certified standards with the certification information appearing on the product. Beef is a relatively expensive meat, so for many people, it is a treat rather than a staple. We may want higher standards for a special meal than the rushed one we grab on our way back to the office.
We particularly want to avoid any sense of discomfort about the quality of our food if someone might ask us a question (a visitor perhaps). Food decisions are complex. In our research, we have noticed that the more frequently you eat a product (daily, or multiple times a week), the less interested you are in extra certifications. When dining out, yes, you have concerns; serving company at home, absolutely; but maybe not so much for the meal in between work and soccer practice.
How can you verify the quality you want to provide in every situation?
An economic characteristic of the Canadian beef market is that more than 70 per cent of the beef animals processed go through two large plants in Alberta. These large multinational processors, with globally integrated supply chains, may have little current interest in selling beef that satisfies outside accreditation because of the need to segregate the products for particular end users, creating transaction costs. After all, they have their own branded products (Cargill Sterling Silver Premium Beef, for example).
This economic fact of life may have been what Earls was facing when it decided to go with a U.S. supplier for its Certified Humane product. However, if the Canadian industry knows that Certified Humane is a requirement for sale to a company such as Earls, the supply will develop given time. Consumer demand for Certified Humane and Canadian sourcing will be satisfied. Consumer demand is the crucial economic factor affecting the range of products available.
In the end, a fundamental question is how we ensure that the public knows that all Canadian animals are treated with consistently high animal-welfare standards. Although the public has high levels of trust in farmers, they need to make many food-related decisions in a day, and a nice logo makes life easy. Likely current events will mean a Canadian logo is coming sooner.