Seed World

Is There Light at the End of the Value Creation Tunnel?

Seed growers and producers are looking at options for value creation and throwing their support behind the trailing royalty option.

When public consultations on value creation began in 2018, producers and seed growers had a lot to decide on. Which of the two models introduced would best generate funding for plant breeders while ensuring seed growers and farmers were happy with the model selected?

The first option, of course, is an end-point royalty — where a royalty would be collected at the elevator upon grain delivery and be given to the breeder of the variety.

The second proposed option is a trailing royalty, where the producer would sign a Seed Variety Use Agreement (SVUA) upon buying a new variety of seed that has an SVUA attached to it —enabling the breeder of that variety to collect the royalty each and every year that seed was saved and planted.

As discussions about value creation continue, some high-profile members of the seed and agriculture industries are rallying around the trailing royalty (SVUA) option as the model to go with to ensure plant breeders have a healthy stream of revenue to create new varieties of cereals.

“We need breeders to continue to invest in Canada and breed new and better varieties. If we keep the status quo, they will fall further and further behind the rest of the world. The sooner farmers understand that, I think we can move ahead with the trailing royalty model,” says Gunter Jochum, a Manitoba farmer and seed grower. He’s also president of the Western Canadian Wheat Growers Association.

Gunter Jochum

Jochum sees the trailing royalty/SVUA model as the best way to ensure producers have access to cutting-edge new varieties, but he didn’t arrive at that opinion overnight. Like many farmers, he has had a lot of learning to do about value creation in a short time.

“I got involved with the Western Canadian Wheat Growers Association and attended a Grains Roundtable meeting in 2017, and that’s the first time I found out about seed value creation to fund breeding of cereals in Canada. As I got more familiar with it I realized it was a very important topic. There isn’t a big investment in cereal breeding in Canada, not like we see in canola, corn and soybeans. That has to change,” he says.

“Sure, we have good cereal varieties right now, but the more I looked into it I realized the funding for cereal breeding and research is modest at best, and if anything, it’s stagnant in Canada to the point of going backwards. Government is reluctant to add new money into breeding and, if anything, they’re just maintaining what we have now.”

With parts of the world like Australia, France, and the United Kingdom having successful royalty collection systems of their own for cereals, Jochum says it’s time to get behind the trailing royalty model and implement it.

“I think the majority of the pushback from farmers in regard to the trailing royalty model results from farmers not understanding what’s at stake. They worry their farm-saved seed rights will be taken away, which isn’t true. Breeders just want to be paid for the work they do. You can still save your seed, you simply must declare what you’re saving and planting and pay a royalty on varieties that have an SVUA attached to them,” Jochum says.

“Yes, there will be a cost to farmers, but there will be a return down the road. It might take five to 10 years to see the fruits of that, but if we don’t do this, I think we give up way too much as far as new varieties coming to market are concerned. Change is scary but falling behind the rest of the world if even scarier.”

Laurie Wakefield

Encouraging Certified Seed Use

Laurie Wakefield, a former president of the Saskatchewan Seed Growers’ Association and the owner of Wakefield Seeds, says in terms of safeguarding his business, the trailing royalty option is the way to go in implementing a value creation system for Canada.

“We wouldn’t want to support any kind of system that could be a deterrent to people buying certified seed. The trailing contact system would allow producers greater choice of either buying certified seed or not, and at the same time know what it is going to cost them,” Wakefield says.

“With an end-point royalty system, they’re going to pay the royalty anyway on what they produce. Of the two options, the trailing royalty model is the way to go.”

A third proposed model for value creation has been put forward by a few producer groups. At the July annual meeting of the Canadian Seed Growers’ Association and Canadian Seed Trade Association in Whistler, B.C., a model referred to as the Collective Research Model was introduced by the Alberta Federation of Agriculture, Keystone Agricultural Producers and the Agricultural Producers Association of Saskatchewan.

The Collective Research Model is proposed as being similar to an end-point royalty collected on delivered grain, but would distribute one portion of the funds collected to plant breeding programs and another portion to a “collective pool”. A new producer organization would be tasked with identifying the collective research priorities and distributing funds to projects addressing those priorities.

Neither Jochum or Wakefield sees it as a viable option.

“That concept could easily be incorporated into a trailing royalty system without a lot of difficulty if we wanted to go down that path,” Wakefield says.

Jochum doesn’t believe farmers are thrilled with the proposed Collective Research Model.

“I don’t see it attracting any private business. Without the private sector, all it does is drive up the cost of current variety development without bringing anything new to the table. What we want is a model that will encourage private investment as well as public breeding — that will create competition and should keep the price of seed reasonable,” Jochum says.

“It should not be a runaway market. There’s a lot of fear about private sector breeders getting into cereals, but the fact is they will have to do their best to bring great varieties to market in order to be competitive with the public sector, which already breeds very good cereal varieties.”

In the end, Wakefield believes seed growers and producers are beginning to come around and see the value not only in value creation, but in the trailing royalty option.

“For some time, a lot of people didn’t have their eyes on the prize — on what the desired outcome was. The trailing royalty model will have the least detrimental effect on the pedigreed seed system. It’s important to think of it that way, because a lot of people are apprehensive when it comes to change and no doubt this will have big implications for certified seed growers,” Wakefield says.