Date posted: March 15, 2006

Economist's reality check

Canada's crop breeding system is a powerful economic asset that needs new ideas.

Plant breeding is an excellent investment. But no matter how many times that is proven, or how well it is understood, there's simply no getting around the farm income crisis and the need for a better model to sustain Canada's crop breeding effort.

That was the analysis presented by Dr. Richard Gray, head of agricultural economics at the University of Saskatchewan, in a plenary session at the 2006 PRRCG meeting.

Gray confirmed the impressive returns on plant breeding research - approximately 40 percent return on breeding investment for Canadian prairie crops as a whole - but he also delivered a reality check on how that success story is currently dwarfed and threatened by problems in agriculture.

"The farm sector is definitely facing a long-run farm income crisis," says Gray. "Despite a billion dollars in support, we're going to see negative net farm income again this year. If you take out government support, there hasn't been a year in the last five that agriculture has made a dollar."

No matter how good the returns, that situation makes the prospects slim for additional government funding for crop breeding. Still, says Gray, there's an opportunity for better funding and crop breeding models if the crop development community can come together with a unified vision and message.

"Governments are viewing agriculture as sort of a basketcase, thinking maybe if we just give it a bit of medicine it'll go away. But as others are saying, if we can get our institutions on track, if we can get further productivity improvements, agriculture can be a viable sector again."

Pushing forward a new agenda

The crop breeding community, with the strong economic returns it provides, is in a good position to help push that agenda forward, he says. Gray and colleagues recently conducted a study of the return on investment to farmers who support variety development through the Wheat and Barley Check-off Fund, administered by Western Grains Research Foundation (WGRF). It determined returns from wheat breeding research at a minimum 22 percent and returns from barley breeding research at a minimum 36 percent.

"I think that's why we've seen producer groups even in tough times say, 'yes, we are dedicated to more genetic research.'"

But while global returns to plant breeding research are high, Canada is in tough to keep up with competitors who are investing more dollars in this research. Producers are already investing through check-offs, and asking for more government funding is a difficult sell.

Health a major opportunity

One potentially powerful lever to attract additional government investment may be targeted initiatives for nutrition and functional food efforts, he notes. "Consumer health is a $100 billion issue in Canada. Nutrition and functional food certainly can be part of the solution."

Health is an area uniquely suited to government support, he says. The benefits of crop varieties with enhanced nutritional or functional food value are captured by taxpayers in the form of quality of life and reduced health care costs. "Because the benefits are external, public good benefits, we can't expect market-driven solutions in this area."

One percent of Canada's health budget is $1 billion dollars per year, he says. Those are big dollars agriculture could tap into. "Governments have been pre-occupied with treatment, very little on prevention. I think eventually they'll get their head around the idea that prevention is the better way to go. I think we do need a huge public investment in nutrition and functional foods development, particularly for the health of our wallets."

Strong potential in biofuels

Biofuels is another key area of opportunity, he says. Using crops for ethanol production has gotten the most attention but the conversion efficiency is better on biodiesel. Using biomass as a natural gas replacement also has strong potential.

"It's interesting that in North America, the natural gas price is above the liquid fuel price. So why not try to replace natural gas? That's something we can do with biofuels."

One approach is to ramp-up a strategy to address these opportunities, as part of ia greatly enhanced public research and innovation strategy. "I think the discussions taking place saying can we do a better job of sharing and coordinating public research and industry needs, are worthwhile. If there's an indication that public research or publically funded research can be done more effectively, then we're more likely to get resources."

Opening access to public system

Bringing smaller private breeding firms into the fold is an important approach to any new model, he suggests. "I think we have to look carefully at creating some research platforms that industry and smaller firms can use." One idea is to offer open access to large, publicly accessible research budgets that require the users to allow free flow of the genetic or processes that result from that public investment.

Another model to consider, similar to Australia's Grains Research and Development Corporation (GRDC) system, is an industry controlled system, funded by a combination of producer check-off and public dollars.

Whatever the approach, now is not the time to stand still, says Gray. "From an economist's perspective, if you look at where the grain economy is right now, and you look at the investments in China and India, you really have to ask: Does the grains sector really have a future unless we get our act together? I think there is a growing sense in politicians minds that we have to find a long-term solution. I think it's time to exploit that rather than say 'let's give up' - I don't think anybody wants to do that."

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