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Funding Innovation ‐ The Journey Continues November 25, 2013

Funding Innovation Symposium – the Journey Continues g y p y

A value chain process to develop a “Made in Canada” system to fund plant breeding and research Fairmont Hotel, Winnipeg November 25, 2013 Facilitator: Warren Wilson, Intersol

Funding Innovation ‐ A Technology Value System November 25, 2013

Why is CSTA Facilitating? I t ti l S d F d ti St d d t i d th t C d ’

• International Seed Federation Study determined that Canada’s

ability to generate funds for research, plant breeding and variety development in wheat ranks closest to the lowest in a ety de e op e t eat a s c osest to t e o est the world

• There is a strong demand for new and improved varieties to

g p improve Canada’s competitiveness

• Government of Canada is refocusing its research priorities and

looking to the private sector

• For many crops, private sector is unable to recover investment

costs

Funding Innovation ‐ A Technology Value System November 25, 2013

Why is CSTA Facilitating?

• CSTA’s Board priority is to create an environment that fosters

investment and innovation

• Recognizes that this cannot be achieved by the seed sector

alone

Funding Innovation ‐ A Technology Value System November 25, 2013

The Value Chain Process I t ti l i A il 2013

• International symposium April, 2013
• Objectives Were:

‐ To achieve a common understanding in the value chain of systems in selected countries ‐ To achieve a common understanding of the Canadian environment ‐ Ultimate goal – to agree to work towards the development

• f a “made in Canada” system

Funding Innovation ‐ A Technology Value System November 25, 2013

The Value Chain Process S i C l i

• Symposium Conclusions were:

‐ The current system does not and will not stimulate investment investment ‐ A new model needs to be developed collectively by the value chain value chain ‐ The model must ensure that all who contribute benefit, and all who benefit contribute and all who benefit contribute

• Working Group established to develop and propose a new

model model

Funding Innovation ‐ A Technology Value System November 25, 2013

Value Chain Work Group was established in April, 2012

Crosby Devitt, Grain Farmers of Ontario Grain Producers Kent Erickson, Alberta Wheat Commission Dave Hansen, Canterra Seeds Seed Sector Archie Wilson, C&M Seeds George Clayton, AAFC Research Branch Plant Breeders/Developers Norm Dreger, Syngenta Monte Kesslering, Viterra* Grain and Seed Logistics Grain and Seed Logistics Dave Sefton, Western Grains Research Foundation Funding Organization Andrea Johnston, AAFC Innovation Policy AAFC , y AAFC

* A change in employment resulted in Monte leaving the group in early November

Funding Innovation ‐ A Technology Value System November 25, 2013

CSTA’s Role: CSTA i f ilit ti th

• CSTA is facilitating the process
• CSTA’s members are actively participating
• Results of the process will be the product of a collective
• Results of the process will be the product of a collective

process

• Success will belong to the value chain

Success will belong to the value chain

Funding Innovation ‐ A Technology Value System November 25, 2013

Project Overview Obj ti f th W ki G Objective of the Working Group

• To design as system concept for discussion that conforms to

the principles identified in April the principles identified in April ‐ Principles ‐ Objective Objective ‐ Scope ‐ Glossary of Terms Glossary of Terms

Funding Innovation ‐ A Technology Value System November 25, 2013

Principles A it li d d l h ld A new or revitalized model should: 1. Be built on a plan that is defined in a collaborative way and founded in consensus founded in consensus 2. Be proactive to ensure that the results meet value chain needs in the future (market pull) needs in the future (market pull) 3. Be flexible and adaptable to the needs of the marketplace 4. Encourage and promote competition along the value chain

Funding Innovation ‐ A Technology Value System November 25, 2013

Principles A it li d d l h ld A new or revitalized model should: 5. Ensure that value is generated for the entire value chain and that the system rewards success that the system rewards success 6. Ensure that everyone who benefits, contributes – and that the contribution is commensurate with the benefit the contribution is commensurate with the benefit 7. Be forward looking and change embracing but not discount what we have what we have 8. Be efficient and transparent and not leave a large administrative footprint administrative footprint

Funding Innovation ‐ A Technology Value System November 25, 2013

Objective: Objective: To design and propose a “Canadian Technology Value System” that will effectively capture funds from the value chain for y p investment in plant breeding and technology development, in

• rder to bring benefits to all stakeholders along the value

h i chain.

Funding Innovation ‐ A Technology Value System November 25, 2013

Scope

• Initial focus on cereals (wheat, oats, barley)

( , , y) ‐ But have the potential to be adopted for other crop kinds should the value chain choose

• Focus on engaging the value chain to increase investment in

plant breeding, technology and variety development Will l t th k f i i dit d

• Will complement the work of commissions, commodity and

trade associations but will not address: ‐ Marketing and marketing systems g g y ‐ Regulations or regulatory reform ‐ International trade or trading rules M k t d l t d ti ‐ Market development and promotion ‐ Industry organization or policy advocacy structures

Funding Innovation ‐ A Technology Value System November 25, 2013

Royalty As allowed under Intellectual Property law, a royalty is a payment made to an inventor every time something they have created or invented is bought or used by others. Royalties have the purpose to compensate the inventor for the use of the

Glossary of terms

Royalties have the purpose to compensate the inventor for the use of the technology/product he/she has invented. Seed Royalty A payment made to the inventor (plant breeder/developer) of a variety, collected from the acquirer (purchaser) on the first acquisition of the seed. F S d S d R lt A t d t th i t f th b t f hi /h i ti h ti Farm Saved Seed Royalty A payment made to the inventor for the subsequent use of his/her invention each time the product of planting his/her invention is used for seed. End Point Royalty A payment made to the inventor (plant breeder/developer) of a variety collected on the grain or product resulting from the planting of the seed and returned directly to h the inventor. Check‐off/Levy Funds collected on delivery of a product – generally crop specific – by a central

• rganization empowered to do so by federal and/or provincial regulation.

Funds are used for any purpose defined by the organization (e.g. research, i ti k t d l t f di ifi i ti t ) communication, market development, funding a specific organization etc.) Technology Value System The term proposed as the name for the concept that will be designed by the working group. A system designed to ensure that all (along the crop value chain) who benefit from the results of plant breeding and research make a contribution results of plant breeding and research make a contribution. Or A system designed to generate funds for investment in plant breeding and research, contributed by all stakeholders along the value chain.

Funding Innovation ‐ A Technology Value System November 25, 2013

Project Overview A “Technology Value System” that has three components gy y p

• 1. Determining the value – what is required? How should it be

measured?

• 2. Capturing the value – a mechanism to generate funds from

the value chain

• 3. Sharing the value – how to demonstrate that the objective is

being achieved

Funding Innovation ‐ A Technology Value System November 25, 2013

Determining the Value Work Group considered possible ways to determine the value to p p y be captured and shared 1 Possible Indicators of “increased value” for each of wheat, oats and barley:

• By 2025 the number of plant breeders and developers

ki i ti il bl t th C di k t l ill making varieties available to the Canadian marketplace will have increased by X%

• By 2025 the number of varieties available to farmers will
• By 2025 the number of varieties available to farmers will

have increased by X%

Funding Innovation ‐ A Technology Value System November 25, 2013

• By 2025 the annual rate of yield gain from genetics will have

increased from the current X% to X%

CWRS h i ld f i i

120 Manitoba

CWRS wheat yield vs. year of registration

(data from SK and MB Seed Guides)

100 110 Manitoba Saskatchewan 90 100 70 80 70 1950 1960 1970 1980 1990 2000 2010 2020

(Thomas, J. and Graf, R. 2014. Can. J. Plant Sci. In press.)

Funding Innovation ‐ A Technology Value System November 25, 2013

Determining the Value

• Canada’s investment compared to selected countries
• An analysis by Agriculture and Agri‐Food Canada

The AAFC presentation will be distributed once it is approved for distribution

Funding Innovation ‐ A Technology Value System November 25, 2013

Determining the Value ‐ Discussions

• What do we like about these approaches?
• Are they the correct ones?
• Should we use indicators? Are these appropriate? Others?
• What are the impressions of the Canadian investment

position?

• Is total investment an appropriate indicator?

Funding Innovation ‐ A Technology Value System November 25, 2013

Capturing the Value Guided by the principles established in April, the Work Group y p p p , p proposed for consideration, a Technology Value System with two components: 1. A fixed, flat rate, (per tonne) delivered grain royalty established for each crop kind (wheat, oats, barley) C ll t d t th i t f d li i t f l

• Collected at the point of delivery or point of sale
• Farmer declares the variety on delivery
• Proceeds distributed to the owner of the variety or owner
• Proceeds distributed to the owner of the variety or owner
• f Canadian marketing rights

2. A credit applied to the delivered grain royalty for purchases 2. A credit applied to the delivered grain royalty for purchases

• f certified seed

Funding Innovation ‐ A Technology Value System November 25, 2013

Capturing the Value Working Group Proposed Concept g p p p 1. A flat amount per tonne, and a single royalty for each crop kind ‐ Flat amount per tonne can improve predictability ‐ Initially a single amount by crop kind to address the ‐ Initially a single amount by crop kind to address the potential for misdeclaration that has been experienced in

• ther countries

Funding Innovation ‐ A Technology Value System November 25, 2013

Capturing the Value Working Group Concept g p p 2. A credit on the delivered grain royalty for purchases of certified seed ‐ ensure farmers continue to benefit from all that certified seed delivers ‐ Prevent loss of certification system which is the foundation of seed quality and international trade 3. Is there a role for other stakeholders on the value chain? What form could it take?

Funding Innovation ‐ A Technology Value System November 25, 2013

Capturing the Value – The Concept Discussions

• What do we like about the concept in general?
• What are our concerns?
• Other Specific questions?

Funding Innovation ‐ A Technology Value System November 25, 2013

Capturing the Value The Form and Foundation of the System y 1. Underpinned by Federal Legislation? Potential benefits: Potential benefits:

• Establishes system in law, creating transparency and

predictability predictability

• Could require impact reports and evaluation of system

A i l l bli h d i l i l i d

• A single rate royalty established in legislation does not

contravene Competition Act

Funding Innovation ‐ A Technology Value System November 25, 2013

Capturing the Value The Form and Foundation of the System y 1. Underpinned by Federal Legislation? Potential Challenges: Potential Challenges:

• Lengthy implementation period
• Legislation can be prescriptive – potential to negatively

affect “freedom to operate” of private investors?

Funding Innovation ‐ A Technology Value System November 25, 2013

Capturing the Value The Form and Foundation of the System y 2. Established in Contracts Between breeders/developers and users of the / p technologies/varieties Potential benefits:

• Could be quickly implemented
• Complete freedom to operate for private investors

Complete freedom to operate for private investors

Funding Innovation ‐ A Technology Value System November 25, 2013

Capturing the Value The Form and Foundation of the System y 2. Established in Contracts Between breeders/developers and users of the / p technologies/varieties Potential Challenges:

• Potentially reduced transparency and predictability?
• A single/uniform royalty likely would contravene the

A single/uniform royalty likely would contravene the Competition Act (seed as collusion)

Funding Innovation ‐ A Technology Value System November 25, 2013

Capturing the Value ‐ The Form and Foundation of the System Discussion Discussion

• What are the benefits of legislation? The Challenges?
• What are the benefits of contracts? The Challenges?
• What are the benefits of contracts? The Challenges?
• What would best fit the principles?

Funding Innovation ‐ A Technology Value System November 25, 2013

Sharing the Value Principle: Everyone who benefits should contribute. Everyone p y y who contributes should benefit Work Group considered how to demonstrate p

• Indicators?
• Investment reports? – mandatory voluntary
• Investment reports? mandatory, voluntary

Private sector investors report annually, to their best ability, their investment in plant breeding and variety development their investment in plant breeding and variety development and projections for near future Others? Others?

Funding Innovation ‐ A Technology Value System November 25, 2013

Producer Canada $ 31.8 Million Public Private S t

3 1, $6.0M

(19%) Sector2, $19.7M (62%) Sector3, $6.1M (19%) Producer5,

Australia $97.3 million

Public Sector6, $56 0M , $21.3M (22%) $56.0M (57%) Private Sector4, , $20.0M (21%)

Funding Innovation ‐ A Technology Value System November 25, 2013

Funding Innovation Symposium – the Journey Continues g y p y

A value chain process to develop a “Made in Canada” system to fund plant breeding and research Fairmont Hotel, Winnipeg November 25, 2013 Facilitator: Warren Wilson, Intersol