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Plant breeding royalty scheme “world’s best”, but challenges remain

by Neil Lyon, 09 August 2017

END point royalties (EPR) continue to provide the financial security that underpins the Australian plant breeding industry, but there are issues of end-users avoiding their obligations that need to be addressed, according to Australian Grain Technologies CEO and head of breeding, Haydn Kuchel.

Haydn Kuchel

Set up in 1994 to encourage the development of new varieties and generate financial returns for breeders, the scheme requires an EPR to be paid on grain production from varieties protected by Plant Breeders Rights, except seed retained by a grower for re-planting.

Speaking at the Australian Grains Industry Conference in Melbourne, Mr Kuchel said EPR continued to drive research and development of new varieties for Australian farmers.

“The way plant breeders in Australia make money is through End Point Royalties. There is no public funding. The only way plant breeders can deliver what Australia needs is through End Point Royalties,” he said.

“It is a great system. It is the envy of the world. We are at the point now where there is more investment in plant breeding per tonne of crop than there is anywhere else in the world.”

Mr Kuchel said the value generated by the system was passed down the chain from breeders to growers.

“The EPR rate on our varieties at the moment is about $3.25/tonne for an AH variety. We try to adjust that to $3/t if it’s APW and $3.50/t if it’s Prime Hard to represent some of the underlying value. We think that is quite fair,” he said.

“But the level for some in the market has climbed up above $4/t. My opinion is that is quite high, but it is a free market. I hope growers take that into account when they are selecting varieties and say “we want to reward the people who are representing good value”.”

End-user compliance

Mr Kuchel said compliance remained a serious issue for the industry.

“Getting people to do the right thing is about education and talking to people about what we do,” he said.

“We rely on everyone else to do the right thing for us to be able to continue to develop varieties. We need everybody to understand the value to be able to help us collect it.

“We are also using DNA fingerprinting post-delivery. We would like to do more of that and partner with the bulk handlers and the trade to get a better handle on why people are misdeclaring, then enter into an education campaign around that.

“Ultimately, it has an impact on our investment decisions. The people who pay more, we invest more.”

Value proposition

Mr Kuchel said the constant challenge for breeders was to develop crop varieties that had potential value further down the chain.

“We have to make sure we are breeding the right crop and ultimately make sure the farmers are aware of the benefits so they can adopt those varieties so the genetic potential becomes realised in the farmers’ hands,” he said.

“When we are thinking about value we are thinking about the price the grower can get for the parcel of grain, which is about its quality, its yield and how low we can push the cost of production.

“Can we get it to be disease resistant so there is less fungicide use? Can we make it nitrogen-use efficient? Once all of that happens, we actually start to make money.”

Predicting quality needs

Mr Kuchel said the focus on quality had been the trump card in Australia’s wheat breeding arsenal, but the challenge was to be able to foresee what quality characteristics the market would require in the future.

“All the markets are changing. What will China want in another 15 years, because it takes us that long to breed varieties and get them out into the market? We need to know now,” he said.

“The system we have now since deregulation has been a great custodian of quality from the researchers all the way through to the ultimate buyer of our wheat. But maybe it is not doing everything we need. Maybe it is not demonstrating value as well as what it could.

“The question is, how are we getting the market intelligence we need to be able to make our breeding objectives clear into the long term, because it takes a while for us to be able to respond? There is more that needs to be done.

“How are we, as an industry, collectively ensuring we are the custodians of the quality the previous step in the chain has contributed? I don’t think we are doing it as well as what we could.”

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