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crop breeding future GROWERS WARY OF 'ADD-ON BAGGAGE' BY KELLIE PENFOLD AND GIO BRAIDOTTI n In many people’s eyes, End Point Royalties have become a fait accompli in wheat breeding in Australia, but some growers have concerns. Many are suspicious about how much of the royalty actually reaches the breeder. While breeders, and some growers, now consider EPRs crucial to Australia’s graingrowing future, others have reservations — based on their experiences so far. Damien Scanlan, who runs a mixed grazing and cropping business on the NSW– Queensland border, says he has no argument against EPRs rewarding the development of improved varieties, but says there is a lot of “add-on baggage” causing concern. He says that exclusive seed distribution systems are proving inefficient and costly: “Third-party IP companies, for example, add no value but increase the system’s costs. The result is that growers pay more without seeing a corresponding agronomic gain.” In particular he points to the emergence of monopolies that are gaining the right to buy IP from breeding programs funded by growers and the public. “These situations lead to growers being reluctant to support the system,” he says. “Consequently, there is a danger that growers will try to stay with the variety they’ve got or look for varieties that are not subject to EPR. Growers are happy to reward breeders who give them a better variety but they say no to this kind of extra baggage.” Mr Scanlan says he wants to see the inefficiencies and exclusivity associated with commercialised seed distribution changed: “I would prefer to see a public release system AUGUST 2006 GROUND COVER 15 End Point Royalties BREEDERS: EPRs KEY TO BETTER VARIETIES BY REBECCA THYER n End Point Royalties are essential to Australia’s grain future, say two of Australia’s leading breeders – Australian Grain Technologies (AGT) CEO Dr Steve Jefferies and LongReach Plant Breeders general manager Tony Kent. Dr Jefferies says EPRs contribute to enhanced rates of genetic gain and, in turn, productivity gains for Australian wheat growers. He says that before AGT became operational, public sector investment in wheat breeding had started to decline to a point where it was unsustainable: “Significant change was required.” Dr Jefferies says to maintain or raise productivity gains above the rate of decline in growers’ terms of trade requires significant and stable investment levels. “EPRs are the mechanism that can provide the resources to ensure the delivery of improved varieties on an ongoing basis,” he says. “EPRs are also market-driven, so the programs that deliver the most benefit to growers will be the programs most rewarded, which in turn will ensure their survival.” Dr Jefferies says EPRs allow a company to maintain a level of investment in wheat breeding and wheat breeding technology that can realistically achieve the productivity gains required. LongReach’s Tony Kent agrees, although he acknowledges grower concerns about EPRs not being fed back to breeding programs: “For us, the issue is simple and our response is this – EPRs go right back into our breeding program because it is EPRs that enable our program to exist and for us to deliver better varieties.” Mr Kent says the EPR amount received by LongReach Plant Breeders varies for each variety. “As a rough rule we would expect a minimum of 80 per cent coming back to us, with any third-party equity to be paid out of our share.” Mr Kent also regards EPRs as a fair way of sharing the risks and benefits of plant breeding. The system allows LongReach, established in 2002 by AWB Limited and Syngenta, to share “the upside and the downside of the products from our breeding pipeline with growers. “For example, if a variety doesn’t perform in the market, that will be reflected directly in our income. And if there’s a drought, we only get our share in the profits of the harvested grain. I believe it’s the most logical way to share the risks and benefits of breeding, and it’s a better way for the market to operate than seed point royalties.” Mr Kent says the EPR system is a world- leading system because it rewards good work and encourages more growers to take on new varieties than a seed royalty system would. “In other developed markets the main revenue stream for breeding companies comes from seed sale royalties.” And although Australia is unique because a high percentage of ‘farmer saved’ wheat seed is used, in other countries a large percentage of seed is bought each year. “These seed prices have to be quite high to give a return to the seed-company (through the royalty) as well as a margin to seed- grower-wholesaler and the retailer,” he says. In response to the concerns raised by growers, Dr Jefferies says he agrees there are too many different collection systems that are time-consuming and inconvenient to growers. “At a recent field day on the Eyre Peninsula I asked growers about EPRs. The majority felt they were necessary because of the withdrawal of government investment in plant breeding, and the need to increase productivity gains through improved varieties. “However, they were also concerned by the paperwork involved in royalty collection. A nationally coordinated and regulated EPR collection system involving all parties in the supply chain would alleviate most of these problems. “There are some growers who are concerned about double-dipping and the answer to this is simple: Would they rather the GRDC invest all the money available in wheat breeding, and not worry about issues such as herbicide- tolerant weeds, crop nutrition, crop diversity or technology such as molecular markers that speeds up breeding? “To fund breeding as well as all these other research areas, the GRDC either needs to increase the current levy or we have EPRs.” Dr Jefferies says that without EPRs “the life would be squeezed from Australian wheat breeding and it would die”. Barley breeding at the South Australian Research and Development Institute. PHOTO: BRAD COLLIS in which EPR will apply, but the distribution is open so that anybody who wishes to retail a certain variety can do so. You can then let the market decide the price of seed instead of an exclusive, private system.” Other growers, like Bruce Piper, chairman of the WA Council of Grain Grower Organisations Ltd (COGGO), support the EPR system, although feel it does need further development. “Costs are rising and if Australian growers want to remain competitive we have to be able to fund plant breeding at a level at which it progresses,” says Mr Piper, who farms at Bindi Bindi. He argues that while Australia may well be leading the world with its genetic gains of 2.3 per cent a year, it is starting a long way behind countries where the average yield is already six tonnes a hectare. “EPRs mean the grains which perform produce the highest volumes of EPR and, hence, the researcher is rewarded and can see they are on the right track,” says Mr Piper. “Farmers quickly work out which variety performs and which doesn’t.” In Victoria, Wimmera grower Andrew Weidemann, who runs a grain enterprise 50 kilometres east of Horsham with his brother Rodney, supports EPRs as a reward to successful breeders, but points out that growers are more likely to embrace new releases if the seed is affordable. He cites the successful release of new chickpea variety Genesis 90. It had lower initial seed costs compared to other grains, so it had a high degree of take-up in the first season. Mr Weidemann says EPRs can also work to encourage breeders to develop a wider range of varietal options for areas relying too heavily on just one or two performing varieties. “The main problem is farmers don’t like seed companies to double-dip – when you pay a lot for the seed up-front as well as the royalty when you deliver,” he says. Another WA grower, Chris Henderson, says that with growers showing a healthy scepticism towards new varieties, EPRs could encourage more rapid variety improvement. “Growers will quickly take up a new variety if it is affordable for them to try and it performs,” he says. “And good results will in turn reward the breeders. “We’re keen to support anything which brings new varieties on track faster because we need all the tools we can get our hands on to lift profits in an environment of rising production costs. “That, along with the improved comparative information available to growers on new varieties, through NVT, should mean more new varieties are embraced by growers, and the pipeline for bringing innovation to growers in the form of improved varieties should flow much better. “No one minds paying for productivity gains,” he says.
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