Where has all the seed money gone?

Glacier FarmMedia – In 2017, people in Canada’s seed industry felt hopeful.

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Private money was flowing into wheat and pulse crops and investment in variety development was expected to increase in future years.

But that projected investment didn’t pan out, particularly for wheat and other cereal crops.

Private firms backed away from cereal crop innovation, mostly because a decent return on investment is doubtful in Canada.

Why it matters: Canada is not seen by some seed developers as worth the investment.

“It’s really difficult to come to Canada and say, ‘I’m going to make some money at this,’” said Lauren Comin, regulatory affairs manager with Seeds Canada, which represents seed growers, breeders, distributors, processors, retailers and others in the seed value chain.

“If you’re not making a return… any logical person would say that’s a reason to not make (an) investment.”

In 2018, the Canadian Seed Trade Association published a report on private investment in Canada’s seed sector. The report showed it had reached $171 million in 2017, up 56 per cent from 2012, for activities like plant breeding, trait development and variety evaluation.

About 80 per cent of the dollars went to canola, soybeans and corn.

But investment in other crops was expanding.

“Major increases are found in wheat, (with) a 237 per cent increase over 2012,” the report said. “Pulses went from almost (nothing) to $12.7 million in 2017.”

In 2015, Limagrain started its cereal research program for Canada and along with other investments, there was a sense of optimism.

But in the fall of 2019, Syngenta closed its cereal research and breeding programs in
Canada.

Then, this year, BASF halted its hybrid wheat breeding program.

“Both of those multi-national programs pulling out of Canada, don’t bode well for investment in at least wheat,” said Todd Hyra, western business manager for Secan, the largest supplier of certified seed to Canadian farmers.

About a decade ago, the federal government introduced a bill committing Canada to international plant breeding standards known as UPOV 91.

The government amended the Plant Breeders Rights Act, boosting intellectual property rights and creating an opportunity to make money from crop development.

With the changes, private investment gathered momentum.

“After 2015, when the PBR Act was amended, so we were compliant with UPOV91. I think there was a lot of hope at that time,” said Comin, who was research director for Alberta Wheat and Barley before joining Seeds Canada.

“(But) we didn’t quite see the positive changes following through.”

Things may have gone off the rails in 2018-19, when Agriculture and Agri-food Canada and the Canadian Food Inspection Agency held consultations with farmers and industry groups about value-creation in the seed sector.

At the heart of the discussion was “whether Canadian farmers should be expected to pay trailing or back-end royalties on the use of farm-saved seed,” so plant breeders receive a reasonable return on their investments, The Western Producer reported in 2019.

Those consultations were unsuccessful.

Sweeping changes to the royalty system did not happen. Farmers continue to use farm-saved seed and pay no royalty.

“It (the failure) was a pretty big deal,” Comin said, because private firms don’t have a structure to capture value from their investments.

One step toward a better return on investment is a system called the Variety Use Agreement (VUA), which has been in place since 2020.

Secan has a couple of barley varieties, from Europe, that use the VUA system.

If a producer wants to use their farm-saved seed for that barley, they pay the breeder a royalty. It could be $2 per acre.

That modest change will reward some breeders, but growers have options. They can choose to use farm-saved seed for a variety that doesn’t have a VUA.

“The variety has to have something special,” to encourage growers to sign a VUA, Hyra said.
Other companies are testing barley, oat and rye varieties from Europe or the United States, to see if they perform in Canada.

Some genetics could succeed, but it’s not the same as a developing a wheat or oat crop for Canada.

“(Cereal) varieties aren’t being specifically bred for Canada, by private investors,” Comin said. “We’re not seeing the initial risk taken in Canada.”

“I think the piece that many miss is the erosion that’s (happened) in the public system over the last decade,” Hyra said. “People forget about the research stations that have closed and the breeders that have left.”

There’s also the matter of speed.

Public breeding programs in Canada have produced world class varieties and Agriculture and Agri-food Canada plant breeders are top-notch. But government moves slowly relative to the private sector, so innovation doesn’t happen at the required pace.

If Canada isn’t an attractive place for investment, farmers in other regions will likely get the latest technology and best crop varieties years before Canadian producers.

“Where intellectual property rights are not clear, not understood or not enforced, innovation suffers,” said the 2018 CSTA report.

– This article was originally published at The Western Producer.