Your Reading List

Driving up the cost of seed

Is the new Seeds Canada getting foisted on farmers just to make us boost seed company profits?

The summer of 2020 will go down in history for changing the fundamentals of grain production in Canada. And it seems many farmers are not even aware this is happening. I am talking about the ratification of Seeds Canada.

I hear you ask, “Who, or what, is Seeds Canada?”

Seeds Canada is the proposed name for the new organization resulting from the amalgamation of the Canadian Seed Growers Association (CSGA), the Canadian Seed Trade Association (CSTA), the Canadian Seed Institute(CSI), the Commercial Seed Analysts Association (CSAA), and the Canadian Plant Technology Agency (CPTA).

Related Articles

Each of these five organizations played a unique and specific function in plant breeding in Canada, all under the regulatory authorization and/or oversight of the Canadian Food Inspection Agency (CFIA).

Basically, until now Canada had a public plant breeding system that utilized private industry to deliver new varieties to the marketplace. For the most part, all facets of the plant breeding system were government regulated.

In essence, Seeds Canada is a movement to privatize the plant breeding system in Canada. The only role of government in the future will be to set regulations. The seed industry itself will direct all aspects of the breeding system and enforce the regulations.

No doubt, the parties behind the creation of Seeds Canada will object to my calling Seeds Canada a privatization of plant breeding. In conversations with representatives from the current seed organizations, all told me Seeds Canada is not a privatization but rather a “consolidation.” In fact, they pointed out that a primary reason for the amalgamation was to create a “single window” for seed regulatory and services.

However, how many customers of the seed industry currently deal with all five separate organizations? Is this really to make life easier for the customer? Is a single organization for the benefit of the customer or for the seed industry itself?

As you might expect, cost reduction was also a reason given for the amalgamation. I was told repeatedly that administration costs could be reduced if there was only one seed organization instead of the current five. It is the same argument that has been used to justify the consolidation of equipment dealerships, chemical companies, fertilizer retailers, and even for the consolidation of the grain handling system. But how much of the cost savings realized by these consolidations have been passed back to the producer?

And are these administrative cost savings even worth the overhaul of the current seed system? To get that answer I turned to the Economic Impact Assessment and Risk Analysis Final Report compiled by JRG Consulting Group and SJT Solutions in March 2018 for Seed Synergy.

Seed Synergy was the name adopted by six organizations about five years ago when they first set out to “develop the vision for the next generation seed system…” according to the Seed Synergy White Paper. (Besides the five above-mentioned organizations, CropLife Canada has been participating in the creation of this new seed system.)

For those of you unaware of who CropLife Canada is, according to the CropLife Canada website: “CropLife Canada represents the Canadian manufacturers, developers and distributors of pest control and modern plant breeding products.” CropLife Canada represents industry and while not part of the amalgamation, it is part of the planning and development of Seeds Canada. So really, if private industry is part of the planning of the new seed system, yet not part of the consolidation, can it actually be argued that this is not a privatization?

But back to the economic analysis report. The authors concluded cost savings to the seed industry will be in the range of $0.6 to $1.5 million per annum. “This is after accounting for the time savings of industry that provide direction and guidance to the current supporting organizations and for the overall lower staff costs in the remaining supporting organizations.”

Really, is this benefit a good enough reason to rework the plant breeding system that generates Canadian seed sales of $3.2 billion each year? It certainly isn’t enough to even be noticeable to farmers buying seed.

The Economic Impact Assessment reveals other economic factors which might be even bigger factors behind the amalgamation push. First and foremost is the suggestion of a new seed royalty system to increase investments in variety development. Most farmers are aware of the debate that ensued last winter over suggestions of an End Point Royalty whereby farmers would be charged a fee per tonne for all specific varieties of grain they deliver into the system, or a farm-saved Seed proposal where farmers would be responsible for paying a license fee each and every year they plant farm-saved seed of specific varieties.

While many farmers may think this plan for charging a new royalty died as a result of the negative farmer feedback, far from it. The report states: “Which of these approaches that is adopted will have a considerable consequence on the seed industry and the investment level in varietal development. Consequently, this is an important issue.”

Without question, the primary goal of a new royalty system would be for the seed industry to profit from the use by farmers of farm-saved seed. The economic report does not even attempt to put a dollar amount which would be paid by farmers in royalties. But what it does focus on is the likelihood that instead of paying such a royalty, some farmers would increase their purchases of certified seed. The report predicts that “if Certified seed use increases by 60 per cent in cereals and pulses, then Certified seed sales will increase from $302 million to $483 million, a $181 million gain that is shared between seed growers, seed distributors, and product developers/plant breeders. If 60 per cent of all cereal and pulse crops were planted with Certified seed, the value of sales increases by $467 million to $769 million, a 155 per cent increase.”

What the report fails to note is that the windfall to the seed industry comes from the pockets of their farm customers.

Of course, an effective royalty collection system for farm-saved seed would require complete transparency of all crops planted and grown. While this offers lots of benefits to seed companies at one end and grain handlers at the other, it comes with costs to producers, not just in the royalties, but also in terms of big data that farmers would be forced to provide.

Finally, there are the fear factor arguments. The seed industry people I spoke to all told me that changes had to be made because the government would be getting out of plant breeding. They pointed out that CFIA was already contracting out things like inspections as if this proved the CFIA was winding down its role. Yet if I hire an agronomist to scout fields on my farm, or to collect soil samples from my fields, that does not mean I am getting out of farming.

There are dire warnings that Canada will fall behind in the development of new plant varieties if there is not increased investment in plant breeding. But the unanswered question is who will determine how new investment is directed. Will it be by farmer demand for specific traits, will it be by end-user demand for specific traits, or will it be by the industry itself on the basis of their profit potential?

And there were dire warnings that the government is giving up plant breeding for financial reasons due to Canada’s rising public debt and, as one person tried to tell me, the costs associated with COVID-19. Yet these claims are hard to understand given there are estimates that plant breeding has resulted in a return to investment for the government of up to 11 to one.

Make no mistake, the endgame of Seeds Canada is to increase profits throughout the seed industry. But those profits are actually costs to commercial grain producers. And it is not only commercial grain producers who should be questioning this amalgamation.

Will the local seed grower be able to compete with multinational seed companies under this new scenario, especially if Seed Canada is controlled by industry? What will be the costs levied on seed growers for services like crop inspections if those costs are no longer regulated by government? While the CSGA used to be the voice of the seed industry, will that voice be watered down by the amalgamation, or changed completely with the addition of the much more powerful voice of CropLife into the seed industry?

As I said at the start, this summer will mark the change. The boards of directors of all five organizations have each already adopted a memorandum of agreement for the amalgamation and all that is needed for this to be a done deal is the ratification by the membership in each organization. The directors have already designated February 1, 2021, as the date the amalgamation will happen.

When I questioned what will happen if members of any of the organizations do not ratify the amalgamation this summer, I was told the boards have until December 15, 2020 to talk to the membership and to hold another vote to try again. It sounds like a done deal to me.

So, it is time farmers start preparing for the new seed system that will be introduced in 2021. At the very least, make sure you know what is happening. The best way is to check out three online documents that describe the Seed Synergy proposal and the amalgamation process:

And ask questions today. Tomorrow will be too late.

Finally, I have some questions for all the members of the organizations who will be asked to vote to ratify Seeds Canada. Have you actually seen a proposed budget for the new organization? What impact will it have on your costs? Who are your customers? Will Seed Canada provide real economic value to those customers or simply increase seed industry profits at a cost to those customers?

Unless economic benefits are shared between the seed industry and your customers, why should customers accept this consolidation?

About the author

Columnist

Gerald Pilger

Gerald Pilger's recent articles

Comments

explore

Stories from our other publications