Value creation

Background

Agriculture and Agri-Food Canada (AAFC) and the Canadian Food Inspection Agency (CFIA) are currently conducting engagement sessions around “Value Creation” to discuss changes to the way new varieties of wheat, barley and other Canadian crops are developed in Canada. Consultations started in 2018 and will resume in late 2019. Producer input on these proposed changes is critical.  

Variety development (breeding) programs across Canada are supported mostly (72%) by government, or public, funding. The balance of the funding for these programs comes from producer check-off via farm commissions. There is also a small amount that comes from the private sector, however this remains a small portion of overall investment. According to a WGRF report, under the current system approximately $56 million is invested annually in wheat and barley breeding programs (with producers and the private sector investing the remainder in similar amounts).

The Canadian barley industry is critical to Canada’s economic output. According to Beer Canada, the beer economy contributed $13.6 billion to Canada’s GDP in 2016. Annual beer sales in Canada generate $5.7 billion annually in government tax revenues. Also, local brewers purchase 300,000 tonnes of Canadian malting barley each year and 85% of the beer consumed in Canada is made here.

Proposed changes

Under this consultation, AAFC and CFIA have proposed two models for evaluation.  

Model 1: End point royalties

  • A Plant Breeders’ Rights Act(PBRA) underpinned national non-refundable royalty payable on all harvested material (i.e., grain)
  • Royalties to be distributed to breeders based on their respective market share
  • Need for a mechanism to provide rebates/exemptions, ensuring royalties not collected on production from certified seed

Model 2: Royalty collection enabled via contracts

  • A Plant Breeders’ Rights Act (PBRA) underpinned mechanism allowing for contracts where producers agree to farm saved seed conditions
  • Purchasers of certified seed for eligible varieties agree to extended contract on farm saved seed use (e.g., agreeing to a “trailing” royalty on farm saved seed)
  • Participating producers report on their annual use of farm-saved as part of their contractual obligation
  • Will require at least some degree of centralization in royalty collection and distribution

Both these proposed models have the potential to have a large financial impact on producers. Given the lack of detail presented by AAFC and CFIA it is impossible to quantify the impact to producers at this point. It is important to note that these models are not the only options for future funding of variety development.  

SaskBarley’s position

  1. Barley needs to be treated separately from other crops.

Barley will be uniquely affected by proposed changes to value creation models so it is critical that the crop be evaluated individually instead of grouped with wheat and other crops. The lack of turnover in malt varieties is a clear demonstration of why these models need to be evaluated on a crop-specific basis. Producers of malting barley are dependent on end-user acceptance and are therefore in a unique position.

  1. More analysis is needed before AAFC can proceed with the proposed models, especially regarding impact to producers.

SaskBarley believes that before any new system for barley variety development in Canada is considered, there must be a thorough analysis of the projected impact of the proposed system on: farm businesses and current rights of farmers around seed use; future investment and innovation; check-off investment to date; and long-term quality and output of the system.

Top priorities of any new system should be providing value to producers, driving innovation and investment in the future of barley breeding in Canada, and honoring the significant investment farmers have made to-date in barley breeding through check-off investments.

SaskBarley also currently supports the right of farmers to use farm-saved seed and we need to better understand how proposed new models would impact this and other current practices around seed purchase and use.

Finally, another top priority should be ensuring that the quality and output of future breeding programs continues to ensure Canada’s position as a top supplier of high-quality barley to the world and a key contributor to the Canadian economy.

  1. More consultations are needed before AAFC can proceed with proposed models.

We strongly believe there has not been sufficient analysis or consultation from the government on the current proposed models for producers to make a decision surrounding this fundamental change.

Generally speaking, many Saskatchewan barley farmers remain unaware and/or not fully briefed on the proposed changes to the value creation models, despite the fact that they will be most directly impacted by them. We have strongly urged the AAFC to extend its reach of communications around the topic as well as the consultation efforts to ensure it is engaging with a representative sample of farmers on the topic before reaching a final decision.

  1. Other models to increase investment in variety development must also be considered in further analysis.

The currently proposed value creation models have a specific focus on future investment in the system. Any new model introduced should be designed to compete on outcomes, not investment dollars alone. It is critical that we develop a made-in-Canada model that works for all players in the value chain and that creates value for producers; this process should not be rushed. There needs to be more analysis done to show how these proposed changes would impact investment and innovation in new barley and oat variety development, in  both the public and private sectors, and the impact these models would have on producers.

In addition, the Canadian system must continue with an independent, merit-based system for variety registration with third-party data. This will be critical in ensuring that we maintain Canada’s reputation as a top supplier of barley to the world and an important contributor to Canada’s economy.

What can you do as a producer?

  • Take a short survey on the topic, facilitated by the Agricultural Producers of Saskatchewan: www.seedroyaltysurvey.com
  • Raise awareness about these proposed changes and their potential impact on producers with your family, friends and neighbours.