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If farmers must pay more for seed, they want more say

A third option has emerged for funding new crop varieties — one that keeps farmers in the driver’s seat. An agricultural economist says it has merit

[UPDATED: Feb. 22, 2019]* When it comes to funding the development of new crops varieties, there could be a third way.

Western Canadian farmers collectively should consider partnering with plant breeders to fund new varieties as an alternative to the two new seed royalty options farm leaders say lack widespread farmer support.

The idea has merit, says University of Saskatchewan agricultural economist Richard Gray, who has studied variety funding for 15 years.

The Alberta Federation of Agriculture (AFA) is exploring the concept along with its sister general farm organizations, Keystone Agricultural Producers (KAP) and the Agricultural Producers Association of Saskatchewan (APAS) and wants a general discussion among western grain producers.

University of Saskatchewan agricultural economist Richard Gray.
photo: Allan Dawson

“I’m working on the idea that you need to create a different entity to do breeding that is literally a government-producer partnership…” Gray said in an interview Jan. 31.

“It does a few things. One, is it keeps the largest wheat-breeding program we have in the country [at Agriculture and Agri-Food Canada (AAFC)] alive. Two, it means Ag Canada can’t walk away without at least giving producers complete control over how that’s going to be commercialized.

“We need something like that here if we’re going to have any kind of assurances that as soon as you create value creation the government is not going to walk away and sell it to Bayer or give it to Bayer.”

Why it matters: Farmers say they’re willing to fund varietal research, but some worry the two proposed funding models from the federal government are the equivalent of handing life science companies a blank cheque. This proposal could address those concerns.

After years of discussion, Canada’s seed industry last fall released two options to get farmers to pay more royalties on cereal crops. They say it’s necessary to drive more work by public and private plant breeders to develop new varieties that will benefit farms.

A trailing royalty would compel farmers, through a Seed Variety Use Agreement, to pay a per-acre or bushel royalty on farm-saved seed.

The other option, an end point royalty, would see farmers pay when they sell their grain.

The Praire wheat, barley and oats commissions came out against the proposal Jan. 14 in a joint media release, stating “… the likelihood of an industry-wide agreement on either of the proposed models is low and (we) are asking for more consultation, including consideration of other options. Further consultations must focus on engaging producers with a new value proposition.”

Deerwood farmer Ian Steppler sees both sides of the argument.

”But I just feel farmers are losing control,” he wrote in a message Jan. 21.

“We are not puppets. Let these companies invest their dollars into their products to buy my business. Ultimately that is how business works. The way I read this, we subsidize their plant-breeding efforts for the breeders to charge us whatever market bears for the crops we grow. Get your hands out of my pockets.”

Some farmers fear private seed companies will pressure the federal government to get out of variety development, AFA president Lynn Jacobson said in an interview Jan. 30.

Angusville farmer James Melnyk agrees.

“The yield gains percentage-wise with wheat have grown at the same percentage as canola without it being privatized,” he said Jan. 23 during an interview at Ag Days in Brandon.

Crop insurance data shows on average Manitoba wheat and canola yields have increased 102 and 80 per cent over the last 25 years.

“We’re getting our yields,” Melnyk said. “We’re getting our quality and we have a public system. The farmers, the taxpayers, the gross domestic product — everybody is benefiting and I think it should stay that way.

“It’s very important.”

Overcharged

Few dispute the value private canola breeders have brought to their varieties, but some farmers believe they pay more than they should because they can’t save canola seed and there are no publicly developed alternatives.

Ag economist Richard Gray agrees.

“Under alternative ways of developing that canola they could still have something similar and not pay nearly as much,” he said.

The marginal cost of producing non-hybrid canola seed is around 40 cents a pound and probably more than $1 a pound for hybrid, Gray said.

“If it’s $1 a pound or even $2 a pound to produce hybrid canola seed that’s a lot cheaper than the $12 to $14 a pound being charged now. At $1 a pound canola seed companies have a billion dollars left over that goes to companies to support their other activities. There’s a lot of rent there.”

Most of that billion dollars leaves Canada and only around $60 million is reinvested in canola variety development, Gray said.

But neither royalty option being discussed would result in wheat following the canola model, Canadian Seed Trade Association president Todd Hyra said in an interview Jan. 23 at Ag Days. Both support AAFC breeders as much as private ones, he said.

“We want to make sure the federal dollars remain part of this puzzle and we want to add some incremental dollars to make sure we are generating some revenue for those programs into the future,” he said. “At the same time we want to create an environment that attracts investment from other parts of the world.”

AAFC says it’s not going to abandon crop research, but if seed companies ramp up AAFC will shift to ‘discovery’ research, Felicitas Katepa-Mupondwa, AAFC’s director of research, development and technology told a meeting on the proposed royalties in Winnipeg Nov. 16, 2018.

“Our long-term vision is that we will partner with those who want to work in this field and when that capacity builds in the sector so there are those who are finishing varieties we may move our resources to upstream science, which is the appropriate strong role for a public institution,” she said.

“If there isn’t capacity in the sector we will continue to finish varieties. If organizations… decide to get into the variety-finishing space… we do not need to compete with those… who are finishing varieties. So if there’s capacity we don’t need to be there — we move our resources elsewhere.”

*UPDATE: The article now contains a clarified statement regarding the amount being charged to produce hybrid canola seed.

About the author

Reporter

Allan Dawson is a reporter with the Manitoba Co-operator based near Miami, Man. Covering agriculture since 1980, Dawson has spent most of his career with the Co-operator except for several years with Farmers’ Independent Weekly and before that a Morden-Winkler area radio station.

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