Farmers who think they already pay too much for seed might be surprised to learn that their contribution doesn’t come close to covering the cost of new varietal development.
A report commissioned by wheat and barley development commissions in Western Canada is broaching what promises to be a sensitive discussion among cereal growers in Western Canada: what role, financially or otherwise should farmers have in varietal improvement?
Brent VanKoughnet, contract executive director of the Manitoba Wheat and Barley Growers Association (MWBGA) said in an interview farmers already help fund new varieties through checkoffs on grain sales administered by provincial wheat and barley commissions and associations.
Now farmers are being asked how much more they want to be involved in cereal development, how much more they’re willing to pay and whether or not they want end point royalties (EPR) to help collect the funds.
- Read more: How should farmers collect money for cereal varietal development — checkoffs, end point royalties or both?
Options are outlined in a report prepared by JRG Consulting Group for the commissions entitled “Exploring Options for Producer Involvement in Wheat and Barley Variety Development”.
Released Dec. 16, the report was funded and facilitated by the farmer-run Western Grains Research Foundation. It’s a starting point and provides context for the discussion, VanKoughnet said in an interview Jan. 13. The MWBGA is one of eight commissions and associations that commissioned the report.
“We’ve identified this, over the long run, as probably the top issue for the decade,” he said. “We need to have a variety development system that will keep us competitive in the future. Without that, everything else is really window dressing. This is fundamental to cereals being a profitable choice on farms. Tough to walk through but absolutely necessary to be focused on and come up with the best path forward.”
The report provides five options for farmer participation from Model A — the current approach with more co-ordination between the cereal commissions — to Model E — farmers owning their own cereal-breeding company.
The consultants prefer Model C — one non-profit producer body called Wheat and Barley West.
That model allows for economies of scale and a consolidated farmer voice accommodating larger and/or more focused strategic investments in variety development, the report says. It’s less risky for farmers, especially compared to starting a farmer-owned seed company. It also puts farmers in position to gear up should the federal government, which currently produces and pays for most new cereal varieties, decides to cut back.
Model B is having eight provincial commissions involved in varietal development. Model D, dubbed Australia North, is separate partnerships between commissions for pre-breeding, breeding and commercialization.
“Our analysis suggests that producers do not need to own and operate a Prairie-wide seed company to achieve desired outcomes,” the report says. “Producers can provide necessary leadership, influence and direction on variety development through partnerships and leveraging of producer funds. Owning a seed company can create more risk for producers without necessarily gaining additional rewards. However, individual producers can continue to participate in startup and smaller-scale seed companies if they wish to seek an ownership position.”
Agriculture and Agri-Food Canada (AAFC), spends $41 million a year on cereal development, but earns just $5 million to $6 million in royalties from certified seed sales of its varieties, the report says. Farmers contribute another $7.5 million through checkoffs. Together that’s about $14 million or only a third of AAFC’s cost.
Under the current system AAFC can only collect a return on its investment through royalties on certified seed sales. Sales are limited because farmers only have to buy the seed once and then can plant saved seed.
“(V)alue is not being captured by product developers every time their seed is planted,” the report says. “Rather, producers capture this value through yield improvement and use of farmer-saved seed.”
Private companies face the same problem and that’s why so few develop cereals, VanKoughnet said. Other major wheat-producing and -exporting countries such as Australia, France and the United States have the same problem. That’s why publicly funded cereal development still dominates here and abroad. And because wheat is so important to Canada’s economy, government investment makes sense.
“There is a very positive return back to (Canadian) society from a successful cereal industry,” he said. “So the public investment of securing the stability of variety development goes well beyond just ‘good for farmers.’”
The report says about $56 million a year is spent on cereal development in Canada — 72, 15 and 12 per cent contributed by government, private companies and farmers, respectively
The report says farmers should contribute more because it’s in their self-interest. They can influence the research and benefit from higher yields and traits that benefit them and end-users.
“When contrasted with other countries, the annual level of expenditures on variety development in Western Canada should likely increase,” the report says. “For example, in Australia variety development expenditures are 2.7 times the amount invested in Canada, when measured based on tonnage of wheat produced. When measured on a per acre of wheat planted, Canada falls well behind Australia, the U.K. and France, for example.
“A stretch goal for wheat and barley in Western Canada could be a $110-million investment per annum (almost double current spending), to match just the overall investment in wheat in Australia.”
But it also warns if farmers pay more there’s a risk governments might cut back — something farmers don’t want, VanKoughnet said.
“There’s a lot of discussion that’s going to have to take place and range of concerns and understandings that need to be accommodated.”