BIOTECHNOLOGY &THE CANADIAN CANOLA SECTOR: Challenges, Opportunities, and Evolution

Transcription

1 BIOTECHNOLOGY &THE CANADIAN CANOLA SECTOR: Challenges, Opportunities, and Evolution Stavroula Malla, University of Lethbridge Derek Brewin, University of Manitoba

2 INTRODUCTION Crop research has undergone a major transformation In the 1970s, most research was a result of public investment and the products of research (or research outputs) were public goods. Currently, private firms dominate in the research investment (in the biotech sectors), and control most of the research output both in terms of new varieties and proprietary technology. Traditionally most of the R&D were publicly funded Private sector under-invested from social point of view market failure Non-excludable goods; Poor or non-enforceable property rights; Many small producers (free rider); Externalities associated with the use of the technology Empirical evidence supporting government involvement in R&D : High rates of returns (large number of studies found a very high social rate of return to agriculture - often 30-50% or greater) The introduction of biotechnology and IPRs has privatized & completely transformed the Canadian canola industry; canola has changed from a minor to dominant/major crop in Canada; industry has experienced significant growth e.g., area seeded to canola varieties, the number of varieties available, crop yields have been on an upward trend for 50 years.

3 INTRODUCTION cont d Government research policies have changed as the structure of the canola research industry changed. the question that arises is whether today s government involvement in canola R&D is appropriate or, sufficient. There is concern that the growth in the canola sector could be sustained and even increased over time. Another issue is whether producers benefit from the new technologies. The agriculture sector around the world faces some major challenges regarding food security, at a time of increasing pressures from population growth, changing consumption patterns and dietary preferences, climate change, loss in ecosystems biodiversity, and demands for the use of biomass to provide additional renewables. There is no validated evidence that GM crops have greater adverse impact on health and the environment than any other technology used in plant breeding. There is compelling evidence that GM crops can contribute to sustainable development goals with benefits to farmers, consumers, the environment and the economy (EASAC 2013, p.2). Outline Part A:Impacts of biotechnology in the Canadian canola sector: Overview&Assessment Part B: Benefits of new Biotechnologies Part C: Policies and Regulations

4 Part A: Impacts of biotechnology in the canola sector: Overview & Assessment Overview of Changes: Biotechnology & IPRs The IPRs for crop research have changed: In 1980s: Open pollinated; Non-transgenic; Without Plant Breeder s Rights In 1990 s: Plant Breeder s Rights; Process patents; Licensing Agreements for Transgenic Crops; Technical Exclusion: hybrids (HYB); herbicide tolerant (HT) Figure 1:Proportion of Canola Area Protected by IPRs 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% HYB Total HT Total years

5 Part A: Overview of Changes: Biotechnology & IPRs cont d The introduction of biotechnology and IPRs: * altered the nature of research products (non-excludable excludable goods ) * increased the private R&D investment *changed the nature of the agricultural R&D industry (non-rival nature of research output & freedom to operate concerns concentrated industry) Research expenditure in the Canola Industry $ million Private Applied R&D Public Applied R&D Public Basic R&D years

6 Part A: Overview of Changes: Biotechnology & IPRs cont d Private firms also control most of the research output: *registration of new varieties; proprietary technology *private market share and revenue due to their R&D investment Research Returns in the Canola Industry $ million TUA/HT rent Private Public Revenue year

7 Part A: Impacts of biotechnology in the canola sector: Overview & Assessment Important trends in Canada s canola crop adaptation & features of the canola industry: Area, Varieties, Ownership, Yields Top 20 Varieties of Canola by Area Seeded Rank Variety Yield Type of HT Hybrid Breeder 1st Year Polish Area in Ha in Area Name* Index Seeded [end] 1970 to Span 100 Conventional Agriculture Canada 1971 [1980] Pol. 2,255,389 5 Torch 100 Conventional Agriculture Canada 1973 [1985] Pol. 4,657,145 9 Tower 109 Conventional University of Manitoba 1974 [1984] 3,044,723 6 Candle 94 Conventional Agriculture Canada 1977 [1991] Pol. 3,511, Regent 102 Conventional University of Manitoba 1978 [1993] 2,933,710 2 Tobin 103 Conventional Agriculture Canada 1983 [2003] Pol. 9,408,145 1 Westar 122 Conventional Agriculture Canada 1984 [1997] 10,433, Legend 123 Conventional Svalöf Weibull AB 1989 [2000] 2,725, AC Excel 119 Conventional Agriculture Canada 1991 [2008] 2,951,079 7 Hyola Conventional HYB Advanta Canada Inc [2004] 3,257, Quantum 148 Conventional University of Alberta 1994 [2008] 2,140, A Clearfield Pioneer Hi-Bred Production Ltd ,536, Quest 126 Roundup Ready Agricore Cooperative Ltd [2003] 2,324, A Clearfield Pioneer Hi-Bred Production Ltd ,575, H Roundup Ready HYB Pioneer Hi-Bred Production Ltd [2010] 2,168,118 4 InVigor Liberty Link HYB Bayer Crop Science ,487,043 8 InVigor Liberty Link HYB Bayer Crop Science ,104, InVigor Liberty Link HYB Bayer Crop Science ,582,199 3 Invigor Liberty Link HYB Bayer Crop Science ,577, Invigor L Liberty Link HYB Bayer Crop Science ,525,350

8 Part A: Impacts of biotechnology in the canola sector: Overview & Assessment Important trends in Canada s canola crop adaptation & features of the canola industry: Area, Varieties, Ownership, Yields Top 20 Varieties of Canola by Area Seeded Rank Variety Yield Type of HT Hybrid Breeder 1st Year Polish Area in Ha in Area Name* Index Seeded [end] 1970 to Span 100 Conventional Agriculture Canada 1971 [1980] Pol. 2,255,389 5 Torch 100 Conventional Agriculture Canada 1973 [1985] Pol. 4,657,145 9 Tower 109 Conventional University of Manitoba 1974 [1984] 3,044,723 6 Candle 94 Conventional Agriculture Canada 1977 [1991] Pol. 3,511, Regent 102 Conventional University of Manitoba 1978 [1993] 2,933,710 2 Tobin 103 Conventional Agriculture Canada 1983 [2003] Pol. 9,408,145 1 Westar 122 Conventional Agriculture Canada 1984 [1997] 10,433, Legend 123 Conventional Svalöf Weibull AB 1989 [2000] 2,725, AC Excel 119 Conventional Agriculture Canada 1991 [2008] 2,951,079 7 Hyola Conventional HYB Advanta Canada Inc [2004] 3,257, Quantum 148 Conventional University of Alberta 1994 [2008] 2,140, A Clearfield Pioneer Hi-Bred Production Ltd ,536, Quest 126 Roundup Ready Agricore Cooperative Ltd [2003] 2,324, A Clearfield Pioneer Hi-Bred Production Ltd ,575, H Roundup Ready HYB Pioneer Hi-Bred Production Ltd [2010] 2,168,118 4 InVigor Liberty Link HYB Bayer Crop Science ,487,043 8 InVigor Liberty Link HYB Bayer Crop Science ,104, InVigor Liberty Link HYB Bayer Crop Science ,582,199 3 Invigor Liberty Link HYB Bayer Crop Science ,577, Invigor L Liberty Link HYB Bayer Crop Science ,525,350

9 Part A: Impacts of biotechnology in the canola sector: Overview & Assessment Important trends in Canada s canola crop adaptation & features of the canola industry: Area, Varieties, Ownership, Yields Top 20 Varieties of Canola by Area Seeded Rank Variety Yield Type of HT Hybrid Breeder 1st Year Polish Area in Ha in Area Name* Index Seeded [end] 1970 to Span 100 Conventional Agriculture Canada 1971 [1980] Pol. 2,255,389 5 Torch 100 Conventional Agriculture Canada 1973 [1985] Pol. 4,657,145 9 Tower 109 Conventional University of Manitoba 1974 [1984] 3,044,723 6 Candle 94 Conventional Agriculture Canada 1977 [1991] Pol. 3,511, Regent 102 Conventional University of Manitoba 1978 [1993] 2,933,710 2 Tobin 103 Conventional Agriculture Canada 1983 [2003] Pol. 9,408,145 1 Westar 122 Conventional Agriculture Canada 1984 [1997] 10,433, Legend 123 Conventional Svalöf Weibull AB 1989 [2000] 2,725, AC Excel 119 Conventional Agriculture Canada 1991 [2008] 2,951,079 7 Hyola Conventional HYB Advanta Canada Inc [2004] 3,257, Quantum 148 Conventional University of Alberta 1994 [2008] 2,140, A Clearfield Pioneer Hi-Bred Production Ltd ,536, Quest 126 Roundup Ready Agricore Cooperative Ltd [2003] 2,324, A Clearfield Pioneer Hi-Bred Production Ltd ,575, H Roundup Ready HYB Pioneer Hi-Bred Production Ltd [2010] 2,168,118 4 InVigor Liberty Link HYB Bayer Crop Science ,487,043 8 InVigor Liberty Link HYB Bayer Crop Science ,104, InVigor Liberty Link HYB Bayer Crop Science ,582,199 3 Invigor Liberty Link HYB Bayer Crop Science ,577, Invigor L Liberty Link HYB Bayer Crop Science ,525,350

10 million hectares Part A: Impacts of biotechnology in the canola sector: Overview & Assessment Important trends in Canada s canola crop adaptation & features of the canola industry: Area, Cont d Canola Area Seeded in Canada Three significant increases in area have occurred over time. one took place around 1970 with the introduction of canola varieties; another spike happens around 1994 when private breeders entered the market with HT varieties and hybrids; last shift started around 2004 and continued up to 2011 due to the introduction of very high yielding hybrid varieties especially Invigor 5020 in 2003 and then Invigor 5440 in 2007.

11 Part A: Impacts of biotechnology in the canola sector: Overview & Assessment IPRs related issues Other Issues - Competition Share of Seed Area (2012) Private Advanta Canada Inc. 0.31% Bayer Crop Science 55.14% Brett-Young Seeds 1.01% Canterra Seeds Ltd. 1.77% Cargill Specialty Oils 6.55% Maribo / Danisco Seed 0.00% DLF-Trifolium 0.08% Dow Agrosciences Canada Inc. 8.79% Monsanto Canada Seeds Inc. / Calgenne / Limmagrain 10.48% Norddeutsche Pflanzenzucht Hans-Georg 0.18% Pioneer Hi-Bred Production Limited 10.63% Svalöf Weibull AB 0.00% Viterra / Sask Wheat Pool/Agricore/Proven Seeds 4.49% Public Agriculture Canada 0.09% University of Alberta 0.04% University of Guelph 0.00% University of Manitoba 0.43% Note: The introduction of biotechnology & IPRs has created incentives to undertake research, but created a number of complex issues, e.g.: market/industry concentration; pricing of seed/varieties; rules/fees for using new technologies/varieties with patented gene traits; obstacles to commercialize new traits/varieties (e.g., freedom to operate/tragedy of anti-commons); recently gene trait cross-licensing agreements

12 Part B: Benefits of new Biotechnologies: Summary of Returns to Canola Research Studies Study Returns to Research Meta-analysis Alston, et al. (1998): 294 studies IRR: % Brinkman (2004): Canadian studies Gray & Malla (2007): Canadian studies B/C: (barely, wheat, rapeseed) IRR: large number of studies: 30-50% or greater Canola Nagy & Furtan (1978): Rapeseed/Canola B/C: 17.64; IRR: 101; Producer Benefits (direct): 47% Ulrich, Furtan & Downey (1984): Rapeseed/Canola IRR: 51; Producer Benefits (direct): 68% Ulrich & Furtan (1985): Rapeseed/Canola IRR: 50; Producer Benefits (direct): 65% Furtan & Ulrich (1987): Rapeseed/Canola B/C: 34.1 Canola & biotechnology Malla, Gray & Phillips (2004): Rapeseed/Canola IRR: Initially exceeded 25%; declined to market returns; (40% 7%) Fulton & Keyowski (1999): Canola Producer Benefits (direct): $ $242.13/acre (gross returns); no net gain HR vs conventional Phillips (2003): HT canola Producer Benefits (direct): $70 million (in 2000) Canola & indirect /environmental benefits CCC (2005): Volunteer HT canola Environmental Benefits: HT and Conventional Systems: not significantly different (w.r.t volunteer control management) CCC (2001): transgenic canola Producer Benefits (direct): $66 million in 2000 (or $10.62 per acre); Total Indirect Impact: $ $215.0 million ( ) Smyth et al. (2010) and Gusta et al (2011): HT canola Producer Benefits (direct): $150 million (average ); Smyth et al. (2011a): HR canola Smyth et al. (2011b): HT canola Canola & productivity Veeman & Gray (2009; 2010): major Canadian crops including canola Canola & health benefits Gray & Malla (2001) Malla, Hobbs, and Perger (2007): Nexara Canola investment in crop R&D results in high returns; overall farmers benefit from adopting new technologies; the establishment of enforceable IPRs is important as they provide incentives to private firms to undertake research; Producer Benefits (indirect & environmental benefits): $235-$278 million (average ) Producer Benefits (indirect & environmental Benefits): 64% of producers are now using zero or minimum tillage; 50% reduction in the use of HR herbicides Environmental Benefits: 1 million metric tons of carbon is either sequestered or no longer released (HT canola); Environmental benefits CAN$5 million Crop Yields: constant absolute growth and declining proportional growth rate in yield; a slowdown of productivity growth in crop production since 1990 Switch from rapeseed to canola & health information: $32 per metric ton increase in demand; 9% permanent reduction in yield; $1.67/kg externality, or $25 million per year health costs savings in Canada; industry gained & producers benefited Healthcare Savings: Cdn$ 1,818 - $ 639 million annually (from reduction in daily TFA intake)

13 Part B: Benefits of new Biotechnologies: Summary of Returns to Canola Research Studies Study Returns to Research Meta-analysis Alston, et al. (1998): 294 studies IRR: % Brinkman (2004): Canadian studies B/C: (barely, wheat, rapeseed) Gray & Malla (2007): Canadian studies control; better volunteer IRR: large canola number of management; studies: 30-50% or greater reduced tillage) Canola Nagy & Furtan (1978): Rapeseed/Canola significant also health B/C: benefits 17.64; IRR: 101; (healthcare Producer Benefits savings) (direct): 47% related to Ulrich, Furtan & Downey (1984): Rapeseed/Canola canola oils with health IRR: traits 51; Producer Benefits (direct): 68% Ulrich & Furtan (1985): Rapeseed/Canola IRR: 50; Producer Benefits (direct): 65% Furtan & Ulrich (1987): Rapeseed/Canola B/C: 34.1 Canola & biotechnology Malla, Gray & Phillips (2004): Rapeseed/Canola IRR: Initially exceeded 25%; declined to market returns; (40% 7%) Fulton & Keyowski (1999): Canola Producer Benefits (direct): $ $242.13/acre (gross returns); no net gain HR vs conventional Phillips (2003): HT canola Producer Benefits (direct): $70 million (in 2000) Canola & indirect /environmental benefits CCC (2005): Volunteer HT canola Environmental Benefits: HT and Conventional Systems: not significantly different (w.r.t volunteer control management) CCC (2001): transgenic canola Producer Benefits (direct): $66 million in 2000 (or $10.62 per acre); Total Indirect Impact: $ $215.0 million ( ) Smyth et al. (2010) and Gusta et al (2011): HT canola Producer Benefits (direct): $150 million (average ); Smyth et al. (2011a): HR canola Smyth et al. (2011b): HT canola Canola & productivity Veeman & Gray (2009; 2010): major Canadian crops including canola Canola & health benefits Gray & Malla (2001) Malla, Hobbs, and Perger (2007): Nexara Canola there are important environmental benefits associated with new canola varieties and new technologies (e.g., better weed Producer Benefits (indirect & environmental benefits): $235-$278 million (average ) Producer Benefits (indirect & environmental Benefits): 64% of producers are now using zero or minimum tillage; 50% reduction in the use of HR herbicides Environmental Benefits: 1 million metric tons of carbon is either sequestered or no longer released (HT canola); Environmental benefits CAN$5 million Crop Yields: constant absolute growth and declining proportional growth rate in yield; a slowdown of productivity growth in crop production since 1990 Switch from rapeseed to canola & health information: $32 per metric ton increase in demand; 9% permanent reduction in yield; $1.67/kg externality, or $25 million per year health costs savings in Canada; industry gained & producers benefited Healthcare Savings: Cdn$ 1,818 - $ 639 million annually (from reduction in daily TFA intake)

14 Part B: Benefits of new Biotechnologies Cont d Direct Returns to Canadian Farmers: HT Average Benefit 2012 Canola Product Lines: A System Comparison of Costs and Benefits Roundup Ready Liberty Link Clearfield Open Pollinated Farmer System Costs Seed Cost ($/ha) $97.74 $91.76 $91.64 $33.84 Herbicide Cost ($/ha) $12.35 $28.55 $33.76 $74.10 TUA ($/ha) $37.05 $25.56 $30.21 $0.00 System Cost ($/ha) $ $ $ $ Gross Returns Yield (tne/ha) Commodity Price ($/tn) $530 $530 $530 $530 Expected Gross ($/ha) $983 $1,034 $1,004 $900 Less System Costs ($/ha) ($147) ($146) ($156) ($108) Net Farm Returns ($/ha) $836 $888 $848 $792 It was noted that the average farmer in Canada was worse off adopting the new trait because of high prices for the HT seed. As yields and traits improved, the gains for average farm producers were significant The cost to the farmer for HT seed was considerably more than the seed conventional system. Higher yields and lower herbicide costs lead to much higher net farm returns for RR, LL and Clearfield systems.

15 Part B: Benefits of new Biotechnologies Cont d Direct Returns to Canadian Farmers: Benefits Over Time Estimated Yields (t/ha) Seeded Area Million ha Total Gain Over Conv (in Million $) Year Conv LL Clear RR Conv LL Clear RR LL Clear RR $ $ 8.08 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1.90 $ $ $ $ $ $ $ $ $ $ $ $ 2.59 $ $ $ $ $ $ 2.13 $ $ $ $ $ $ 2.56 $ $ $ 5.38 $ $ $ $ $ $ $ $ $ $ $ $ $ Yields in all of the HT systems surpass those in conventional systems in 2000 and then grow at a faster rate than conventional for the next 14 years The seeded area planted to non-ht falls to around 50,000 hectares or less than 1% of all canola area seeded. The total gain to producers of adoption HT systems over the old conventional canola seed systems at 2013 and 2014 yields and prices is over $1 billion a year.

16 Part C: Policies and Regulations Canadian governments were initially involved in the direct provision of the applied and basic research that first developed canola. Today they have generally withdrawn from commercial variety development, while facilitating private sector research, and often generating restricted access to basic research results (i.e., exclusive licensing); federal funding has fallen Concerns have been raised regarding the appropriateness of the public provision of: applied research (e.g., new varieties); basic research (e.g., new technology/knowledge, genes, germplazm, research platforms); research infrastructure to facilitate private research (e.g., Innovation Place in Saskatoon, SK), private-public collaboration; or even government subsidization of private research (e.g., AAFC MII which matched private research investment with public research resources).

17 Part C: Policies and Regulations Cont d Private R&D underinvestment; Public Funding Falling Off Too Socially optimal amount of research Vs Imperfectly Competitive R&D there is a private firms R&D underinvestment due to firms inability to capture all the benefits generated from R&D the situation is exaggerated when IPRs are non-enforceable and even more so when IPRs non-enforceable & basic research is underprovided Government role; policies/programs appropriate in Canada's canola industry: targeted government subsidies (e.g., subsidies on the cost of R&D or research output); A decrease in the marginal cost of experimentation and/or an increase in the output price; will increase the private firm s R&D and applied research. public provision of basic research; Applied public research crowds out applied private research expenditure -- i.e., an increase in public applied research reduces the private firm s R&D and applied research. varieties with health traits or environmental benefits; charging fee above marginal cost to access basic research (or granting exclusive licenses); invest in areas where industry may not invest (e.g., agronomic research, open pollinated non-ht varieties), and/or areas where IP are not or not well defined

18 Summary & Conclusion There have been significant benefits associated with the new canola varieties/biotechnology. The area seeded to canola varieties; the number of varieties available; and canola yields have increased over time. There are also important environmental benefits associated with new canola varieties and new technologies (e.g., better weed control; better volunteer canola management; reduced tillage) & significant health benefits (healthcare savings) related to canola oils with health traits Producers benefit significantly from growing new canola varieties. Over time yield gains and herbicide cost savings led to very high gains to farmers from the adoption of HT canola seeding systems. Is there a role for Gov t? -Yes - Applied research: Government should cooperate with the private sector by providing research incentives and not competing with it. - Basic research: Property rights are still poorly defined, there may be an important role in the direct public provision of basic research

19 There is no validated evidence that GM crops have greater adverse impact on health and the environment than any other technology used in plant breeding. There is compelling evidence that GM crops can contribute to sustainable development goals with benefits to farmers, consumers, the environment, [health] and the economy (EASAC 2013, p.2).

20 Thank you