By Karla Canavan, VP Trade and Finance WWF
For the past two decades, beef production has been a key driver of deforestation in Argentina’s Chaco region. Argentina is among the top beef producers in the world in terms of volume, and the country is well known for high quality beef and the strong genetics of its cattle. Between 2015 and 2019, under then President Macri, international exports soared. Today, approximately 40% of Argentina’s beef is exported; of that, 65-70% goes to China (which secures supply with three-year, long-term contracts for the whole animal), and the rest is destined for Europe’s premium markets. Argentina’s beef exports command high prices, on par with New Zealand, Uruguay, Australia, and the US. Additionally, due to strong biosecurity measures put in place from previous exposure to foot-and-mouth disease (FMD), Argentine beef exports were not as strongly impacted by the COVID-19 pandemic compared to supply chain disruptions seen elsewhere. Today, beef prices are rising, and projections show that beef and soy (for feed) production will continue to drive deforestation in the region.
In the last few years, strong market signals for D
World Wildlife Fund (WWF), Fundación Vida Silvestre, Argentine consulting firm Genesis, and industry expert Victor Tonelli have been exploring the feasibility and economic potential of DCF beef in Argentina and found the country is uniquely positioned to take advantage of market demand for DCF beef and leather due to its superior product quality, reputation in global markets, existing traceability systems, and ability to react quickly to strong market signals. This work began in 2018 and to date has identified key market signals, demonstrated feasibility, and cultivated interest with multiple stakeholders, including the private sector, government, NGOs, and financial institutions.
The next phase will allow us to incorporate a broader market segment to the scope of the work. The continuation will test the export potential of DCF beef and leather by engaging key supply chain players including cattle farmers, slaughterhouses, tanneries, leather processors, and buyers. A cradle-to-grave carbon calculator will also be developed that will include the impacts on land use change in the product footprint. The calculator will be a key incentive for commodity producers to demonstrate a lower carbon footprint associated with their products.
Leather production in Argentina follows a dynamic similar to beef, with exports focused on premium products worth around USD 2 billion per year. Argentine leather is of a higher quality than that produced elsewhere in South America due to premium genetics, advanced cattle ranching practices, and favorable climate conditions. This gives Argentina an important commercial advantage across multiple industry segments. Due to the increased volume of exported leather, prices have gone up, making leather increasingly important for slaughterhouses as a source of revenue.
Approximately 50% of leather production is destined for car and furniture applications, with the remainder being used for shoes and other leather goods. Export markets include the US, Italy, China (including Hong Kong), Uruguay, Australia, Mexico, India, and Vietnam. Some of these export markets are particularly sensitive to DCF products, especially with recently passed EU regulations to halt and reverse EU-driven deforestation, and the French Corporate Duty of Vigilance Law. Car manufacturers, fashion brands, and sports apparel companies are actively taking steps to align their ESG practices to comply with increased socio-environmental safeguards demanded by the market.
Although Argentina is currently on a path to continued habitat loss and environmental degradation, leveraging an innovative nationwide jurisdictional approach to DCF beef and leather presents a compelling economic opportunity that also carries significant conservation potential to protect the Chaco and other habitats. The existing traceability systems in Argentina can already verify product is DCF.
Though there is currently no price premium for DCF products, market demand signals from major export markets like Europe and China have changed the equation. A range of factors have aligned to make this moment an opportune time to act, which include:
- The EU and UK are looking to reduce imported deforestation and related carbon emissions through demand-side legislative
- The China Meat Association has made sustainability commitments through the China Sustainable Meat Declaration, which is now aligned with the AFI, and
- Companies are increasingly aware of the impacts of Scope 3 emissions due to their Science-Based Target commitments and are looking for ways to reduce these emissions across their supply chains.
- UK PACT and other international entities have been working to develop awareness and increase the supply of DCF commodities in Argentina.
Access to preferential finance mechanisms for DCF commodities is a key incentive. This phase will include engagement with Development Finance and other commercial institutions interested in supporting the actual export of DCF beef and leather through pilot programs, with the ability to take these projects to scale.
Our intent through this work is to leverage company net zero commitments, market appetite for responsible beef and leather, and the urgent need to solve the climate crisis and drive action in commodity production that demonstrates scalable possibilities in creating more circular, resilient commodity supply chains.