7 July 1995

Putting case

for royalties

The British Society of Plant Breeders has been out and about at recent events putting its case for royalty payments on farm-saved seed. Robert Harris talked to incoming chief executive Roger Turner

Breeders claim they need an income from farm-saved seed to help cover costs. Are they really that short of money?

Yes. There is a big shortfall in the industry. Farmers tend to take new varieties for granted. But it takes 10-12 years to bring a new variety on to the market. For every one that makes it, there are many more that dont.

A breeding programme costs between £0.5m and £1.5m/year to run. That costs breeders £25m/year, but they receive only £18m in royalties.

There are two ways to close the gap. Breeders could raise the level on certified seed. But that could add another 30% on to the £25-£40/t already paid on C2 seed. There would be too much resistance to that. And it could encourage more home saving, so it would be unlikely to work anyway.

The only other alternative is farm-saved seed remuneration.

What effect is this shortfall having on breeders?

Breeders have already cut costs. Companies have gone, and others have cut back breeding programmes and staff. It can only get worse if the losses continue.

One breeder has stopped its cereal programme. Beans, potatoes, rape, sugar beet, oats and spring cereals have been dropped by others. One company has stopped all new investment, and another its biotechnology work.

There has been a 25% cut in staff. Last year seven plant breeders lost their jobs. These are major cuts and realignments. It includes the big boys – lack of funding is eating into core programmes.

To survive, they are putting their money into crops with more assured returns like maize. Cereals are a small market globally. If they dont get cereal royalties here, they wont get them elsewhere.

What does this mean to growers?

In the short term not much. Thats the problem. Because of the nature of plant breeding, if you turn the tap off today it takes a long time to stop dripping. Growers find that hard to grasp.

Eventually they will be faced with fewer varieties with a more European flavour. Breeders will aim for bigger markets. Its also cheaper to breed overseas. In the UK, MAFF has to recover all the costs of official tests and trials. That costs breeders £6-£7m/year. In many countries, the government bears some of that cost – those days are long gone here.

Half the 100% yield increase in cereals since 1947 has come from better varieties. With fewer, less suitable ones coming through, this and other benefits like better disease resistance and quality will suffer.

What is a fair level of royalty to charge on farm-saved seed?

Breeders think a fair level is one that closes the gap. They have pushed for 80% of the C2 level, which they still consider realistic. But 70% will be the start rate, which they are prepared to discount to 50% now, move to 60% in 1996 and then review. If farm-saved seed drops, it would stay at 60%. But if it rises, breeders will inevitably push for more.

I think thats realistic. My own straw poll at Cereals 95 and Velcourt showed some sympathy for breeders. Farmers thought 50% was about right, but that 80% sounded an awful lot. Clearly, there is a psychological barrier there, so breeders had to go some way to remove that.

How much will this cost farmers?

Its difficult to say. Not all varieties will be eligible. To collect a royalty, a variety has to have European plant breeders rights. It is expensive to register and maintain them, and with less popular varieties it can take time to get the money back, so some are not included.

Farmers do not have to pay royalties on any variety until 2001 if they can prove they have saved seed from it before. So two thirds of recommended list varieties will be outside the scheme for the first 5-6 years.

If you assume a 50% rate and the same level of farm-saved seed, royalties on initially eligible varieties would yield just £840,000 next year. If it was 80% on all varieties the potential income jumps to £7m/yr – £6m on cereals and oilseed rape, and £1m for peas, beans and potatoes. At the very most, that would cost about £1/t on a variety like Brigadier.

How will the money be collected, and how will payments be monitored? How much more will this cost growers?

We would have preferred someone to do it on our behalf to keep costs down. MAFF has a list of IACS farms – it would have been very easy to mail invoices and deduct payment from the IACS cheque. But they said no – the information was private.

We talked to others with mailing lists, like the NFU and the Press, but they saw it as a politically hot potato. And seed cleaners wanted too much money.

We are now developing our own mailing list. We propose to bill farmers twice a year and carry out random checks across the country to verify returns. That could add £250,000/yr or more to royalty payments. It would have been a lot less had others helped.

Without access to names, it has significantly raised the costs.

Raising the payment on certified seeds is a non-starter, says Roger Turner. Farm-saved seed remunerat-ion is the only option.

Roger Turner (right) puts the case for realistic royalties to NFUeconomist John Malcolm at Cereals 95.