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Where are investments in Canadian agricultural research headed?

2018 has been a great year with agriculture attracting acclaim as an economic powerhouse in Canada. But is there enough money in research to score on the opportunity?

“Sunny today but with clouds on the horizon” is how Serge Buy describes Canadian government investment in agricultural research.

“There was more willingness for the federal government to invest in budgets 2016 and 2017, and some of the provinces are following suit,” says Buy, who’s the CEO of the Agricultural Institute of Canada (AIC). “That’s a positive sign.”

Buy credits the report produced last year by the Advisory Council on Economic Growth, led by Dominic Barton, for pushing agriculture into the spotlight.

The Barton Report said that Canada could become a food production powerhouse for the world while driving economic growth and job creation here at home. Agri-food was one of six sectors that were singled out by the council as having a high potential, especially with global food demand forecast to grow by 50 to 70 per cent in the next 30 years.

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“Ottawa is now seeing agriculture as a revenue generator and job creator for this country,” Buy says, adding that, for a long time, MPs hadn’t really caught on to what was happening in modern food production, and saw it mostly as an expense that demanded subsidies.

Government funding remains, by far, the largest contributor to Canadian agricultural research and has a return on investment of between 10 and 20 to one.

While attitudes are changing, Buy says that the “clouds” include the fact that there are still a lot of urban MPs who don’t really understand that their constituents depend on and work in the industry, which may mean bad investment choices down the road.

In addition, the latest federal budget came with a review of all funding programs, facilities and assets, which may result in the closure of more agricultural research stations, among other measures.

The current era of running big deficits also worries him because a new age of belt tightening might squeeze off funds needed for agricultural research.

After decades of declines in spending, it’s going to take some time to get back on track in order to support Ottawa’s lofty goal of increasing agriculture and agri-food exports to $75 billion from the current $60 billion by 2025.

Other budget demands in both Canada and the U.S. have crowded out public funding that used to go to agricultural research, according to Richard Gray, a professor in the department of agricultural and resource economics at the University of Saskatchewan.

“Over the last three decades, real public expenditures have gone down, and what used to go to production agriculture has shifted to societal issues — like the environment and food safety,” Gray says.

At the same time, private research has increased. Companies are investing in food products and in genetics and varietal development — especially in soybeans, corn and canola.

To date, the system is still working because the public research on genetics, for example, is feeding into private companies that develop varieties. Industry groups are picking up some of the slack, although it’s still not enough to offset the decline in public research dollars.

The drop was significant. Based on its 2017 overview of Canada’s agricultural innovation system, the AIC reports that for 2015-16, total federal and provincial government expenditures decreased by $2.8 billion to $5.3 billion from 2007-08.

That meant Canada invested 0.046 per cent of its GDP in this kind of research, making it seventh in the world behind New Zealand, China and Korea, but ahead of Australia and the U.S.

China — the world’s second-largest agricultural exporter — has steadily increased investments in agricultural research over the past decade, which in 2015 accounted for 0.081 per cent of its GDP.

The AIC report said that about 70 per cent of the $705 million in federal funds in 2015-16 were dedicated to federal agencies and departments, with the rest going to the provinces, universities, the private sector and non-profits. That represented a decrease of more than 10 per cent from 2010. Provincial spending has also been declining after reaching a peak in 2012.

Going forward, there are a number of silver linings, according to Buy, including what he calls a “more logical” approach to agricultural research by bringing together all the relevant federal departments and agencies — Agriculture and Agri-Food Canada, Health Canada, the National Research Council, International Trade, Infrastructure Canada — to do “horizontal” planning.

“They still haven’t included stakeholders, which is something they should be doing,” Buy says.

There is also money available. The new, five-year, $3-billion Canadian Agricultural Partnership that will replace the current federal-provincial-territorial Growing Forward 2 framework has two areas aimed at agricultural research — AgriScience and AgriInnovate. Under the funding formula, the federal government kicks in 60 per cent and the provinces 40 per cent.

While there was no increase in the envelope over the previous framework agreement, Ottawa has also introduced Innovation Superclusters, a $950-million program which Buy says has the government “picking winners.”

The idea is to strategically invest in large-scale, industry-led projects that will boost the economy and create jobs. Getting funding is a competitive process, and two of the nine shortlisted projects are related to agriculture.

One, led by Ag-West Bio Inc., has 60 partners involved in a project aimed at making Canada a global leader in developing innovative plant-based proteins for food and feed.

The other, led by Agrium Inc., has 50 partners, and is aimed at making Canada a preferred source of “high-quality, safe food using the latest advances in data analysis, quality verification, informatics and traceability in crops, livestock and food processing.’’

Among the 41 projects that weren’t shortlisted were a number of agricultural research projects that Buy hopes will be picked up and supported either through individual federal departments, agencies, the provinces or the private sector.

Ottawa is expected to announce as many as five successful projects in the coming months.

Private shame

Corporate investment in Canadian ag research is falling behind the rest of the world

While government financial backing of ag research in Canada is slowly strengthening, investment by companies continues to fall, and consolidation in the industry does not bode well for a healthier situation anytime soon.

Recent mergers between global firms — i.e. Bayer and Monsanto, Syngenta and ChinaChem, and Dow and DuPont — have created a worrying trend.

“Sometimes, when we see decisions from large companies regarding research, the regional differences are not well-addressed.

Nationally, according to the Agricultural Institute of Canada, private sector investment in ag R&D as a share of GDP has been falling compared to many other advanced economies, dropping from 18th position in 2006 to 25th in 2014.

While agri-business R&D spending has had its ups and downs, lately it’s mostly been down, falling from $290 million in 2009 to $212 million in 2015.

Intellectual property rights may help.Canada updated its Plant Breeders’ Rights Act (PBRA) in 2015, with stronger protection providing opportunities for larger returns for individuals and companies who create new varieties, as well as providing producers with better access to foreign genetics. Since then, there has been a 25 per cent increase in new applications. Between 1999 and 2012, 5,000 different varieties were protected under the PBRA.

“The private sector is only going to invest where property rights give value for products that they create,” says Richard Gray, a professor in the department of agricultural and resource economics at the University of Saskatchewan.

Gray gives the example of Bayer creating a new canola variety. As a result of PBR, farmers have to buy new seed every year. They’re spending $60 to $70 an acre on seed and much of the price is a return on investment to the company that makes the seed varieties.

“It’s an expensive way to fund research,” Gray says. “In canola, there’s more than $1 billion in seed sales, and only $60 million to $100 million in research and development — a lot of the return goes back into shareholders’ pockets and doesn’t go into variety development.”

However, depending too much on private companies has its problems too. For instance, Gray and researcher Katarzina Bolek have identified growing concerns about research efficiency, including duplication, fragmentation of research results, and the difficulty of funding research in areas that lack intellectual property protection.

And what about farmers?

Like other groups, says Josh Cowan, manager of research for the Grain Farmers of Ontario, the GFO uses producer check-offs to leverage additional research funding from the federal and provincial governments and other industry groups.

In fact, in 2016-17, a $1.7 million investment turned into $7.6 million for research into the use of cover crops, the effect of strip-till and fertility placement on yields and phosphorus loading, assessments of barley for malting quality and more.

In the West, check-offs are used by nearly all the big crop organizations to finance research. SaskWheat has set a target of using 80 per cent of its budget for research.

Gray says that for crops like corn, soybeans and canola, varietal research is well-funded through private companies, once the government has done the genomic work.

Research into pulses like lentils and peas is almost exclusively funded through a mandatory check-off. Until recently, it was pegged at one per cent of gross sales.

“So if a producer made $500 an acre, that’s $5 for research,” he says, adding that some producers with 1,000 acres would put $5,000 into the research pot.

The strategy gave a big boost to the industry, helping make Canada the largest lentil producer in the world. But in 2016, the board of the Saskatchewan Pulse Growers Association cut the rate to 0.67 per cent in response to a rise in producer complaints.

A positive trend that Cowan has seen over the past five years is a bigger effort to synchronize what the industry is doing across the country.

“There’s more co-ordination and less duplication of effort — we’re pulling together more and trying to get the best value for the dollars that we have,” he said. “We have to keep working on collaborations to get the work done — we can’t fund everything by ourselves.”

Serge Buy of the Agricultural Institute of Canada agrees. “We need to create a climate where researchers, innovators, and producers work together,” he recently told the Commons Finance Committee. “Enhanced cross-sector collaboration will allow for the rapid adoption of made-in-Canada technology.”

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