Trade eyes royalty scheme for farm-saved seed

MONTREAL — Canadian seed groups are looking for new ways to generate additional revenue from the sale of pedigreed seed varieties, particularly when it comes to widely grown cereal grain crops such as wheat and barley.

To that end, the use of trailing contracts on farm-saved seed appears to be generating interest among seed companies and variety developers, according to sources in Canada’s commercial seed trade.

At its recent annual general meeting in Montreal, the Canadian Seed Trade Association’s intellectual property committee passed a motion endorsing the use of farm-saved seed trailing contract royalties.

That motion was later discussed by the CSTA’s board of directors, which passed a resolution supporting the use of trailing contracts on pedigreed cereal seed that is replanted as farm saved seed.

“I can report that our board passed a resolution, and CSTA’s standing policy now states that we support the farm-saved seed trailing contract royalty model for tabling with our Seed Synergy partners,” said CSTA executive director Dave Carey.

“It is accurate that we support the contract method for value creation in cereals.”

Discussions surrounding the use of trailing farm-saved seed contracts is still early days, Carey added in a July 18 email.

The Canadian Food Inspection Agency and Agriculture Canada are also consulting on proposed value-creation options that were put forward through the federal grains roundtable.

Trailing farm-saved seed contracts would not infringe on farmers’ ability to save and re-use farm saved seed, but if implemented, the contracts would require growers to honour certain contractual obligations after they buy a protected seed variety.

For example, some trailing contracts might require growers to pay a per pound seed royalty when they replant farm-saved seed.

Other contracts might apply the royalties on a per tonne or a per acre basis.

Although the CSTA has endorsed the use of trailing contracts in principle, it has not decided how royalties would be collected or monitored, Carey said.

“(It’s) still early days and … we recognize that we need to engage with the broader value chain on some of (these) questions,” he said.

In Western Canada, the industry-wide implementation of a farm saved seed trailing contract royalty on UPOV-91 protected cereal varieties could generate additional revenues valued at more than $10 million per year, according to a report prepared by John Groenewegen of JRG Consulting Group.

That number is based on a one cent per pound farm-saved seed royalty. It also assumes that UPOV-91 cereal varieties will account for 50 percent of market share in Western Canada.

By comparison, an end point royalty system (EPR) would generate lower revenues and require the co-operation of commercial grain handlers, which would collect the EPR on every tonne of UPOV-91 grain delivered into the commercial grain-handling system.

Both EPRs and farm-saved seed trailing contracts can be used in Canada under the country’s updated and UPOV-91 compliant plant breeders rights (PBR) legislation.

Canada ratified the UPOV-91 seed treaty in mid-2015, not long after it passed the Agricultural Growth Act.

At the time, some farm organizations, including the National Farmers Union, said the ratification of UPOV-91 would cost Canadian farmers millions of dollar per year.

However, CSTA president Todd Hyra said the introduction of new value creation mechanisms such as farm-saved seed trailing contracts is critically important to ensuring that companies and publicly funded organizations continue to invest in plant breeding activities.

It will also give Canadian farmers continued access to improved seed genetics that will boost farm productivity and increase producer revenues.

“Nobody likes to pay more, but there’s some components in here that will provide value (to farmers),” Hyra said.

“When you look at the level of research that this can drive into some crops and the level of innovation that it can deliver, it can be quite meaningful.”

At the Canadian Seed Growers Association, members acknowledged that efforts to generate additional revenue could lead to a greater level of investment in plant breeding.

However, some growers voiced concerns about raising seed costs too much, too quickly — a situation that could reduce the use of certified seed rather than generating new revenue for the industry.

“Are grain growers going to pay an additional fee to access new wheat varieties or are they going to cut back on certified seed and buy less?” said a pedigreed seed grower from Alberta who didn’t want to be identified.

“Commercial grain farmers are already running on tight margins. If we increase their seed costs any more, this could come back to bite us in the (backside).”

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