Better case needed for farm-saved seed royalties

Given that seed companies have the ability to negotiate contracts to collect royalties, the definitive argument for government regulation to sanction royalties applied to saved seed has yet to be made.

Agriculture Canada is in the midst of a consultation process on a proposal to determine whether royalties on saved seed should be included in regulations.

The idea is to build a market driver for private companies to invest in research to develop new seed varieties, particularly in cereals. Traditionally, public funding has fuelled much of that process, but that has been waning over the years and is not going to be the case in the future — at least, not to the same extent.

A royalty of $1 to $3 per acre would cover 10 to 20 percent of the costs of producing a new variety, $20 to $60 million for the Prairies if fully utilized.

Producers are not embracing the idea. Many believe their right to plant saved seeds is sacrosanct, though the term “privilege” is now being used, which irks many of them.

Few dispute that there is a need for improved varieties to address pests and disease, and to increase yields. Some farmers accept that there is an argument that royalties on saved seed would generate private research. Still, many producers are deeply suspicious of the process and the extent of the benefits, and would prefer the accountability of public breeding.

Farmers have long paid front-end royalties, which are included in the price of pedigreed seed, but royalties on saved seed are anathema to them.

Agriculture Canada is looking at two proposals: end point royalties that are collected on eligible commercial grain sold in Canada, and trailing contracts on farm-saved seed that would see growers pay fees on planted acres (or tonnes).

The argument for royalties is that with growing demand in Asia for more food, there will be a demand for more wheat. That will require an investment in research to create improved varieties for growers. It’s thought that with industry consolidation and the number of acres involved, there just isn’t enough incentive for private investment into research for some crops.

The United Kingdom, France and Australia have royalty systems that have sparked more growth in privately funded research that has produced benefits to farmers through desirable traits and better yields.

Some farmers want more say in the process. Others want more transparency. How, for example, do farmers know royalties will encourage more private investment — to the extent of the money collected — rather than corporate dividends?

And why is government intervention needed when seed companies currently have the option of negotiating royalty contracts with farmers? The explanation is that balance and transparency are needed when funding models are being developed, and that certainty in regulation is desired.

Farmers are also concerned that older varieties will be rapidly delisted and they will be forced into buying genetics that impose royalties.

Suggestions for change include limiting the number of years to collect royalties on saved seed, and possibly providing a tax credit for farmers who purchase seeds that are eligible for royalties.

A report by University of Saskatchewan agricultural economists Richard Gray and Katarzyna Bolek on crop-research funding models observed that “the challenge will be to recognize the imperative of increasing research investment, objectively examine the options, and to summon the courage and conviction to change our funding system.”

If so, as one farmer pointedly said at a well-attended consultation session in Saskatoon last week, this should be a negotiation, not a consultation.

Karen Briere, Bruce Dyck, Barb Glen, Brian MacLeod and Michael Raine collaborate in the writing of Western Producer editorials.

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