The Role of Future Public Research Investment in the Genetic Improvement of UK Grown Crops

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The Department for Environment, Food & Rural Affairs

Final Report

September 2002

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Table of Contents

Executive Summary

The spectrum of public sector investment activities

Recommendation

The nature of public investment activity in the UK in comparison with that in France and Germany

In the UK

In France

In Germany

Recommendation

The uptake of public sector research by the crop breeding industry, in relation to government objectives

Recommendation

The uptake of public sector research by the UK crop breeding industry, in comparison with France and Germany

Evidence of market failure in public research programmes

Research

Plant breeding

Recommendations

What difference does public research make to agriculture and its environment, and what differences might it make in the future?

Recommendations

Guidance on the rationale for further R&D and possible mechanisms

Recommendations

1. Introduction & Background

1.1. Context

1.2. Background

1.3. Initial views and aims

1.4. Initial view of public support of plant breeding research

1.5. Perceived needs of the plant breeding industry

1.6. Plant breeding objectives and alignment with DEFRA’s objectives

1.7. Comparisons with the other European economies

1.8. Framework and methodology

1.9. Terms of Reference

1.10. Analysis team

1.11. Acknowledgements

1.12. Disclaimers

References

2. The Plant Breeding Industry – The Economic and Social Context, Structure, Economics and Market Failure

2.1. The Context

2.1.1. The value of crop production

2.1.2. The agricultural workforce

2.1.3. The environment

2.2. The economics of the genetic improvement of crops and market failure

2.2.1. Market failure

2.2.2. Plant breeding and market failure

2.2.3. Monopoly and oligopoly

2.2.4. Free-rider problem

2.2.5. Externality

2.2.6. Poor incentives to adopt environmentally beneficial technology

Recommendation

2.2.7. Ignorance and uncertainty

Recommendation

2.2.8. Time preference rates

2.2.9. The interaction between genetics and the environment

2.2.10. The distribution of benefits

2.2.11. Market failure and the research and development problem

Recommendation

2.3. The structure of crop genetic improvement activities

2.3.1. Development and current structure

2.3.2. Activities

2.3.3. Intellectual property

Recommendation

2.3.4. R&D, Human Capital and Training

2.3.5. Training availability

2.4. Conclusions

References

3. The Spectrum Of Public Sector Investment Activities In The UK

3.1. Funding and research in Great Britain

3.1.1. Overview

3.1.2. Sources of data

3.2. England and Wales

3.2.1. Private sector

3.2.2. Public sector

3.2.3. Levy

3.2.4. Research Councils

3.2.5. Government/Ministry

3.2.6. Charities/aid organisations

3.3. Scotland

3.3.1. Public spending

3.4. Northern Ireland

3.4.1. Public spending

3.5. Interactions between above

3.6. Summary

Recommendation

References

4. Structure and Funding of Current Research and Development in France and Germany

4.1. Current research position in France

4.1.1. Overview

4.1.2. Universities

4.1.3. Applied research without participation of the breeders

4.1.4. Applied research with participation of the breeders

4.2. The funding of research in France

4.2.1. Research spending in plant and crop genetics

4.2.2. The plant genome project, Génoplante

4.2.3. Breakdown of spending on specific crop species

4.3. Current research position in Germany

4.3.1. Overview

4.3.2. Basic Research

4.3.3. Universities

4.3.4. Applied research without participation of the breeders (BAZ)

4.3.5. Society for the Promotion of Private Plant Breeding (GFP)

4.3.6. Regional programmes

4.4. Genetic resources

4.4.1. The plant genome project GABI

4.5. Current research position in the USA

4.6. Summary

4.6.1. Comparison of UK with others – weaknesses & strengths

Recommendation

References

5. Current Research Position In the UK And Other Countries

5.1. Survey of breeders’ views

5.1.1. Breeding for UK crops

5.1.2. Current breeding methods

5.1.3. Breeder’s income

5.1.4. Breeding objectives

5.1.5. Future market pressures

5.1.6. The use of technology in plant breeding and current research

5.1.7. Germplasm

5.1.8. Connections to sources of technology

5.1.9. Outcome of recent public research

5.1.10. Constraints and deficiences

5.1.11. Priorities for future research spending

5.2. Summary

Recommendation

6.How Genetic Improvement Of Crops Might Further DEFRA’s Aims & Objectives

6.1. Introduction

6.2. Background

6.3. Natural resources

6.3.1. Air

6.3.2. Water

6.3.3. Soil

6.3.4. Fossil fuels

6.3.5. Genetic resources

6.4. Environmental pollutants

6.4.1. Nutrients

6.4.2. Phosphorus

6.4.3. Nitrogen

6.4.4. Pesticides

6.4.5. Fungicides

6.4.6. Insecticides and Molluscicides

6.4.7. Herbicides

6.4.8. Plant growth regulators

6.5. Extension of technologies for sustainable development, at home and internationally

6.6. Genetic diversity

6.6.1. Genetic diversity within crops

6.6.2. Genetic diversity between crops

6.6.3. Genetic diversity around crops

6.7. Summary

Recommendations

References

7. The Case for Future Public Investment

7.1. Public intervention – the fundamental arguments

7.1.1. Cost benefit analysis

Recommendation

7.1.2. Vision for genetic research and crop improvement

Recommendation

7.2. The Instruments

Recommendation

7.3. Near Market and Basic Research

7.3.1. The Middle Ground

Recommendation

References

Annexes

Annex 1Terms of Reference

Annex 2Glossary of abbreviations used

Annex 3Contributors and stakeholders visited

Annex 4Cost benefit analysis methodology

Annex 5Research and improvement of UK crops – Case studies

Wheat

Oilseed rape

Peas

Oats

Horticultural crops

Other arable crops

Herbage crops

Biomass crops

Annex 6The situation in the USA – Supplementary information

Annex 7Structure of research and its funding in France

Annex 8Structure of research and its funding in Germany

Annex 9Initial Overview and future requirements

Executive Summary

The Role of Future Public Research Investment in the Genetic Improvement of UK Grown Crops

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The Department for Environment, Food & Rural Affairs

September 2002

(BHI Report Number: I02122-Ex)

Executive Summary

Plant breeding is a powerful tool for changing crops, and hence acting as a force on the rural environment. Genetic improvement of crops has been vital over the past 50 years in supporting governments’ objectives for self-sufficiency in food supply, and for cheap food. For major crops like wheat, it has been demonstrated experimentally that at least half the improvements have been genetic, and this was mainly funded by government.

DEFRA (and formerly MAFF) supports crop genetic improvement research to improve the sustainability of agricultural production by reducing the intensity of the use of external inputs and reducing adverse impacts on the environment whilst maintaining profitability. R&D, which can reasonably be expected to yield results of direct financial benefit to industry, is left to the private sector, including the levy bodies. The study undertaken here is intended to inform the future development of DEFRA’s research strategy.

DEFRA’s rationale for investing in crop genetic improvement research is based on market failure, whereby the market fails to provide the private sector with the incentives to support the quality, mix and delivery of scientific research that provides the mechanisms by which DEFRA’s objectives can be delivered. This study was commissioned to analyse current arrangements for public research investments, to determine whether they are meeting government objectives and to make recommendations.

The Terms of Reference were:

1.Set out the spectrum of UK public sector investment activities in crop genetic improvement research.

2.Compare the scope and nature of public investment in the UK with that of at least two selected major crop producing economies.

3.Analyse how the output of UK public sector research is being taken up by the crop breeding industry to further UK government objectives and how this may develop in the future.

4.Examine the uptake of public research by the UK crop breeding industry in comparison with the corresponding uptake within the two selected EU states.

5.Consider to what extent UK public research programmes are subject to market failure.

6.Address the question: In relation to government aims, what difference does this public investment make to the UK agricultural industry and environment (illustrated by specific examples or through case studies) and what differences might it make in the future?

7.If the study concludes that there is a case for further public funding, provide guidance on the rationale for further R&D. This will consider the full spectrum of funding mechanisms, including LINK.

The following sections outline the conclusions and recommendations of the analysis team, contained in the main report, with reference to each of the Terms of Reference.

The spectrum of public sector investment activities

There is a large disparity between the level of funding of basic research, and of research that connects with improvement of commercial crops. In the financial year 2001/02 UK government spent £42.5M on plant genetic research. Of this £26.5M was on model species, such as Arabidopsis, and £16M was on named UK crops.

Of the research on named crops, £11.2M was basic strategic research, meeting the government’s objectives in supporting world-class science (of which £6.8M was funded through BBSRC, £2.9M through SEERAD and £1.5M through DEFRA),

and

£4.8M was applied research, (of which £4.6M was funded by DEFRA/DARDNI and £0.2M by BBSRC).

In short, 89% of UK government spending on plant genetic improvement research is basic science and 11% is applied science. Given that the knowledge spill-overs and externalities are likely to be even greater from basic research than from applied pre-market research, this seems an inappropriate balance.

The UK agriculture industry (excluding plant breeders) as a whole spends £3M on crop improvement through levy bodies and charitable trusts:

£1.8M on variety trials and Recommended Lists,

£0.4M on germplasm improvement, and

£0.8M on investigative research.

LINK is a government research funding programme, which gives support to private industry-led research initiatives with public funds. It is the principle means through which government supports collaboration between industry and public research scientists. Industry can contribute resources in-kind (such as carrying out field trials) or alternatively, cash, and government will match funding of up to 50% of the total cost of the project.

With respect to the plant breeding industry, LINK accounts for £0.4M of public investment, and thus by definition, industry must contribute a similar amount. In programmes related to sustainable agriculture e.g. Sustainable Arable LINK and Horticulture LINK, there is very little research involving plant breeders. Evidently, some collaboration is ongoing between industry and certain UK institutes outside of the LINK schemes, but this was not quantified.

The plant breeding industry is funded almost entirely by royalties of about £24 M from seed sales. Out of this royalty income, which is decreasing, profits are currently low. Even in more prosperous times, the profits would only be in the range of up to £5 million per annum, and in addition to rewarding the owners of the businesses for their capital employed, these profits must provide the funds for routine re-investment in new crop varieties. Thus very little is available for longer term and higher risk investment such as joint public-private research programmes in activities which the market alone does not sufficiently reward.

The capacity for the breeding companies to invest in win-win public-private research, such as through LINK, is limited. Thus, progress towards DEFRA’s policy objectives will also be limited, if this is based on the expectation that the majority of research in crop improvement for environmental consideration will be funded jointly by industry.

It should also be recognised that part of the disparity in funding between basic and applied research, arises because of the poor credit (acclaim, remuneration and career advancement) that attends all aspects of commercial application of science, compared with science progress per se. This is reflected not just in the careers of the individual scientist, but the attitudes of institutes and funding bodies. Advances in basic science are generally more highly regarded than those in applied research.

Recommendation

1.1 (page 51)The balance between spending on basic research and applied research should be changed so that more is spent on the latter.

Further recommendations below (e.g. 5.4 and 6.5) address the issue of how to increase the funding for applied research. The TORs noted below address particular developments in research strategy.

The nature of public investment activity in the UK in comparison with that in France and Germany

In the time available for this analysis, it was not possible to analyse research spending in France and Germany to the same level of detail as was possible in the UK. Nevertheless, the data collated allowed us to make useful comparisons between the size and scope of research programmes.

In the UK

The majority of research in plant genetics, funded by BBSRC or SEERAD, aims to support world-class science and generate knowledge. The majority of basic research relevant to this study takes place within Universities or BBSRC institutes, and is highly successful in scientific terms. The BBSRC programme is driven by scientific objectives, with curiosity having appropriate emphasis.

DEFRA commissions research to support and develop its policies, and to promote DEFRA’s aims, where the market fails to ensure private sector support. DEFRA’s research portfolio is targeted at areas of market failure and is managed to pursue strategic objectives. This work is also largely undertaken within BBSRC institutes.

Thus Government funds a wide range of research from basic science to applied research. To be effective, this research must be coherent between basic and applied levels, and with the plant breeding industry, but in many cases these links are weak, and are still weakening further.

The forefront of scientific discovery (the molecular biology of plants and microbes) is moving away from the crop sciences; so scope for the cropping industry to apply new science is weakening. The distant vision of comprehensive control over genetics and its future applications is compromising medium-term progress.

While individual companies participate in programmes such as LINK (to the extent defined above), there is no industry-wide collaboration with public sector scientists on topics of strategic importance.

In France

Funding of breeding research in France can be divided into the following areas:

Basic research carried out by INRA, CNRS, Universities and other institutes,

Applied research without participation of breeders, mainly through INRA,

Applied research with participation of scientists and breeders through the economic interest groups (GIE’s),

Applied research carried out by breeders.

The main agricultural research organisation, INRA, has a total budget of 525 million Euro pa (ca. £340 M) and has operational objectives including environmental protection and sustainable production. French research on genetic improvement of crops spans basic and strategic research, through to plant breeding.

A key contrast with the UK is that in France, the economic interest groups (GIE’s) have always interacted closely with INRA and benefited from its research. Traditionally, there has been a clear philosophy that public science should be used for the benefit of French industry, although there are indications that this situation is becoming more difficult to sustain, particularly with the greater involvement of multinational companies in the plant breeding industry.

A significant proportion of research spending is still directed to supporting crop improvement, particularly of minor crops, which the industry will not fund. INRA has its own commercial plant-breeding arm, Agri Obtentiens.

The area of genetics and plant breeding attracts £23.4M of funding within INRA and £8.7M outside INRA,

In terms of basic plant science relating to genomics, approximately £34M is spent inside INRA, and £20M outside INRA

The Génoplante initiative in France (c. £24M/yr) is a GIE programme, aimed at crop improvement through modern genomic sciences, in which all the stakeholders (funders, researchers and industry) work towards common objectives

Within the time scale of the study, no information could be obtained regarding spending by Agri Obtentiens, or by industry bodies such as ITCF and UNIP. Overall it is evident that the level of public spending is markedly higher in France than in the UK, and the involvement with industry, much closer.

In Germany

Basic research is mainly carried out at the Max-Planck Institutes (MPI) who take up new and promising directions in research where Universities are funded insufficiently. Alternatively, MPI may carry out research where the interdisciplinary character of the research means that it cannot be effectively carried out in the University sector. Some 95% of the financial support received by the MPI comes from public funds provided by Federal government and the states. In the time available for this study, it was not possible to get information on the spending on plant genetics within the MPI.

The Federal Centre for Breeding Research in Cultivated Plants (BAZ) comprises 8 sites (housing 10 institutes and 1 gene bank). In some cases breeders are involved with these programmes, but on an ad hoc basis. The average yearly expenditure within BAZ is 23 M Euro (c. £15M).

The plant breeding industry is most closely involved with researchers through the Society for the Promotion of Private Plant Breeding (GFP). The GFP appears to work well. The breeders feel they get useful results from it (in comparison to opinions expressed by UK breeders this study). The breeders’ input is financed through a levy on all companies active in Germany (irrespective of nationality) and these are augmented by public funds from a mixture of sources including the Ministry of Consumer Protection, Nutrition and Agriculture, and the European Union. The total value of the research projects is £3 million Euro/annum (c. £2M/annum) of which 10-50% of costs (depending on projects) are paid by breeders. Most of this input is ‘in-kind’. Projects are split across areas of resistance, renewable resources, quality and nutrient efficiency and so relate to environmental objectives including a reduction in pesticide inputs.

There are some regional programmes in the north east of Germany, especially in biotechnology. These programmes are aimed to be of direct commercial benefit for the companies in that region, and do not only relate to plant breeding. It was not possible in the time available to obtain data relating to such programmes.

Recommendation

2.1 (page 72) DEFRA should explore, with all the players in the UK plant breeding industry, models for increased co-operation between the industry and the research community similar to the GFP in Germany, but not necessarily identical to it.