Wheat: saving seed versus buying seed

By saving wheat seed to avoid paying for certified seed, farmers are depriving research programmes of vital funding. But by relying on a shrinking pool of customers to subsidise its funding, certified seed is pricing itself out of the market. Glenneis Erasmus deconstructs this vicious cycle, and possible solutions.
Issue date 24 August 2007

- Advertisement -

A lack of funding is threatening the sustainable commercial breeding of open-pollinated products. According to Johan de Lange, products manager at Cape Agri, the wheat industry will suffer if better funding methods aren’t developed soon. Low income has already resulted in prominent soya and groundnut breeders either withdrawing from the market or placing embargoes on the development of new cultivars. Patrick Graham, Monsanto’s product manager for wheat and oilseeds confirmed this. “Since wheat is an open-pollinated product, wheat-breeding programmes are influenced by levels of farm-saved seed and inelastic prices,” he says.

“As a result, it doesn’t render the same returns as other crops. Monsanto is a business, like every other seed company, and must function on sound financial principals.” Seed sales and seed saving At the moment, funding for breeding programmes is generated through parent seed sales, levies on certified seed and funds from the Winter Cereal Trust generated through statutory levies. Low certified seed sales are a flaw in the system. “It’s not that farmers are saving more seed, it’s just that they only buy a certain amount of new seed every year,” says De Lange. He says that certified seed sales in the Western Cape, Monsanto’s largest market, have declined from 280 302 bags (50kg each) in 2001 to less than 200 000 in 2006, but adds that the area under production has shrunk from 383 000ha to 285 000ha during that time. In effect, the certified seed market share remained relatively stable, fluctuating around 37%.

A survey by Monsanto indicated that the major driver of farm-saved seed is the commercial seed price, not the commodity prices farmers get for their wheat. Graham explains that a farmer’s decision to buy commercial seed is based rather on input cost pressures than on the market wheat price. There’s also little chance that producers will buy more certified seed in future. “Farmers have been saving seed for generations, it’s definitely not going to change now,” says Andries Theron, Western Cape representative of Grain SA, who produces small grain in the Swartland. He adds that the majority of farmers will buy a certain percentage of certified seed per year to replace some of the farm-saved seed, as buying certified seed for the whole farm is simply too expensive.

- Advertisement -

The current funding system The situation has turned into a vicious cycle. Producers are unwilling to buy more seed due to high prices and seed companies have to increase prices to compensate for low sales revenues. “Royalties were only R5,50 a bag four years ago. Today they’re an astronomical R20 a bag,” De Lange explains. “Fewer producers are willing to buy certified seed and those who are have to bear the brunt of the lack of sales.” G raham says a large portion of the cost of cultivar development is derived from commercial seed sales. Since the whole industry benefits from these seed breeding programmes, the farmers purchasing commercial seed are in effect subsidising those farmers who don’t. There is another flaw in the way funding is generated. Producers currently pay a statutory levy of R7,50/t and most of this goes towards the Winter Cereal Trust, which in turn has to allocate funds to various research programmes.

New cultivar development and improvement programmes have to vie with other research programmes for funding, and De Lange believes this is problematic as the allocated funds are insufficient. In addition, the statutory levy is based on the tons of wheat produced per year, and annual yields fluctuate according to market trends and climate. “If a drought lowers yields or farmers plant less wheat because of low market prices, then the statutory levy will be negatively affected and less funds will be available for research,” De Lange explains. This fluctuating funding complicates the long-term financial planning for companies who develop new cultivars, and developing a new cultivar is a long-term process. “New technologies have significantly reduced development time, but cultivars must still be tested under field conditions,” says Graham. “It still takes five to 10 years before new cultivars become available to the market.” He adds that it can cost between R7 million and R12 million to develop and release a new cultivar.

Thriving with new cultivars Most farmers agree that losing the breeding programmes would be a disaster. “Leading-edge varieties are essential for South African farmers to operate at maximum efficiency and to remain globally competitive,” says Theron. He adds that, “New cultivars can help reduce farm input costs by rendering the wheat resistant to certain diseases and pests. They can also improve yields and wheat quality.” Improved seed cultivars and production methods have helped increase wheat yields from 2t/ha 10 years ago, to 2,5t/ha today. “At an average of 300 000ha produced in the Western Cape, and a current realisable commodity price of R2 000/t, improved yields over the past 10 years translate into a benefit of R300 million annually to the wheat industry. And this doesn’t take into account the benefits accruing from disease resistance,” Graham says. De Lange adds that farmers shouldn’t look at certified seed simply as seed – it represents years of technological advancement and genetic improvement. Possible solutions One solution would be to use cultivars developed in other countries. Evaluating the status and future research priorities of the South African Winter Grain Research Programme in 2002, Ian Edwards, CEO of Grain Biotech Australia, warned that SA would have to pay a yield penalty of 5% to 10% on imported cultivars.

Each imported cultivar would have to be subjected to trials in SA to ensure its suitability for our production conditions. There’s also a chance the standardisation and quality parameters for local mills would suffer. Theron believes that a levy specifically aimed at cultivar development and improvement could be a possible solution. De Lange agrees and points out that many countries, such as Australia and North America, place a levy on germ plasm based on the farm gate price to fund research programmes. All producers, whether using certified or farm-saved seed, contribute to research and development. De Lange proposes that producers should declare the varieties of wheat upon delivery to the silo. The funds generated through this levy should be distributed to the breeding institutions in direct proportion to the market share their varieties occupy. De Lange adds that this type of levy could reduce the royalties on certified seed, making it more affordable. Contact Johan de Lange on (022) 931 8205, or e-mail Patrick Graham at [email protected] |fw