Third alternative for seed royalties proposed

The model uses an end point royalty system but some of the money would go for public-interest research

Attendees at the joint annual meetings of the Canadian Seed Growers’ Association and the Canadian Seed Trade Association heard about a proposed model for seed royalties endorsed by the general farm organizations of the three Prairie provinces.

Although lacking in specifics, the value creation model, presented by Alberta Federation of Agriculture president and Enchant-area farmer Lynn Jacobson, is based on the principles of enhancing public variety development and allowing producers to have some say in plant breeding.

These goals would be accomplished by an end point royalty collected at point of sale on all eligible varieties of grain. The royalty would be collected and remitted back to plant breeders based on their percentage of market share, with what Jacobson called a “carve-out” held by a collective research entity with representation from producers, the seed industry and the public sector.

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These funds — an as yet unspecified percentage of the royalty — would be awarded to projects such as plant breeding for minor crops, exploring under-researched traits deemed important to Canadian producers, and supporting other activities that address gaps in plant breeding.

“It’s more like the French end point royalty model,” said Jacobson.

In France, an end point royalty is collected on some classes of wheat at the point of sale. Eighty-five per cent of this end point royalty is remitted back to breeders, while 15 per cent goes to a wheat-breeding research fund. Farmers also pay a royalty on certified seed. However, farmers who show proof of certified seed purchase receive a rebate on their royalties.

Jacobson’s group prefers this model over the seed variety use agreement (SVUA), also known as farm-saved seed royalty, favoured by the seed trade which would charge a per-acre fee when farmers save and plant their own seed of eligible varieties.

“This is a fairer model to begin with because we collect on production so if you have a poorer year, you don’t have to pay as much,” said Jacobson. “It also doesn’t take away the right of the seed company to have a contract system with a limitation on the number of years you can use farm-saved seed.”

The AFA developed the model, in part, through discussions with University of Saskatchewan ag economics professor, Richard Gray.

Gray has studied plant-breeding systems and value capture models around the world. The Agricultural Producers Association of Saskatchewan and the Keystone Agricultural Producers of Manitoba are working with their Alberta counterpart to fine-tune the details.

A survey for producers will be available at www.seedroyaltysurvey.com by mid-July.

Buy-in from producers is integral to the success of any model, Jacobson said.

“Unless the majority of people are willing to comply, it just is not going to fly,” he said.

Attendees also heard about value creation from panellists including Manitoba producer Gunter Jochum, FP Genetics CEO Rod Merryweather, and Saskatchewan seed grower Laurie Wakefield. All three were in favour of the seed variety use agreement model.

Kofi Agblor, of the Crop Development Centre at the University of Saskatchewan, also spoke from the floor of the meeting. As the managing director of a public breeding institution he encouraged attendees to think more broadly than the federal Agriculture Department when it comes to funding public institutions.

“We are not insignificant,” he said of the CDC. “We are resourced differently than AAFC but we are treated the same as them, as an afterthought.”

As a developer of genetic material he said he also prefers the contract-based SVUA model.

“We will be dealing with a lot of traits in the future that you have to manage in a closed loop and grow from certified seed only so you preserve the trait. That would be easiest with the SVUA because that could be written into the contract.”

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