IP at the root of Australia’s wheat industry

October 13, 2016

With 2016 being the UN International Year of Pulses, the Australian government takes a look at how IP in the development of new grain species has impacted the economy.

wheat

Intellectual property has had a large role to play in moving wheat breeding from being almost entirely publicly funded in the 1990s to being completely funded by the private sector today.

Wheat accounts for more than a quarter of the total value of all crops produced in Australia. In terms of all agricultural commodities produced nationwide, wheat is second only to cattle. In the 2015/16 season, the Australian Bureau of Agricultural and Resource Economics and Sciences forecasted the gross value of wheat to be $7.45 billion, with exports worth $5.8 billion.

Western Australia leads the way in wheat exports, generating half of Australia’s total annual wheat production and sending more than 95 per cent offshore. A major export avenue for Western Australian growers is the wheat used for the production of noodles. One million tonnes of Udon noodle grain is exported to Japan and Korea every year at a value of $350 million.

The Australian wheat industry has gone through significant transformation in the last 20 years and the Australian IP Report 2015 shows innovation in wheat breeding is quite healthy. Over the past decade, Triticum (the scientific genus for wheat) has had the third highest number of plant breeder’s rights (PBR) applications submitted in Australia, behind only Rosa (roses) and Prunus (trees and shrubs).

The Plant Breeder’s Rights Act 1994 (PBR Act) allows an owner of a plant variety the ability to not only sell their variety, but also to collect royalties at any point in its use. This provision led to the introduction of end point royalties (EPR) in the years following the PBR Act’s ratification. For wheat growing, this is a royalty paid on the total grain harvested by the growers of a PBR protected variety.

Kerrie Gleeson of Australian Grains Technologies explains how EPR have invigorated the wheat industry saying, “Prior to the year 2000, 95 per cent of wheat breeding programs were in the public sector, either funded by universities, Grains Research and Development Corporation (GRDC) levies, or state governments.”

Moving ahead to the present day, Australian wheat breeding is now completely funded by the private sector due to the income generated by EPR.

Before EPR, royalties were paid to breeders when they sold their seed to farmers. Tress Walmsley, CEO of InterGrain, estimates that while a new variety of grain costs around $3 million to breed, under the old seed-based royalty system breeders only received around $50 000 per variety. This was a commercially unsustainable system and saw a decline in public investment for developing new varieties.

The EPR system radically changed the commercial value of developing new grain varieties in Australia. By deferring collection of royalties to the time of harvest, the initial cost of purchasing seed is lower.

An example of the EPR system in action is ‘Drysdale’, a wheat variety developed by CSIRO to cope with Australia’s low rainfall. Currently a royalty of $1 is charged to famers for every tonne produced. While this may not seem like much, considering the production of wheat averages around 25 million tonnes per year, the return from EPR really adds up.

Income received from EPR helps support the continuing research into developing new varieties and reduces the reliance on public funding.

The advantage of the EPR system is that plant breeders share the risk with farmers. If a harvest is low, for example during a drought, the farmers will be affected, and as a result the returns to the breeders through the EPR will be down. This gives breeders an incentive to develop varieties that are resilient and high yielding; the more successful the crop is, the bigger the return for both breeders and growers.

THE AUSTRALIAN WHEAT INDUSTRY HAS GONE THROUGH SIGNIFICANT TRANSFORMATION IN THE LAST 20 YEARS.

Wheat breeding in Australia is now a highly competitive industry. The major wheat breeding companies now have access to new technologies and resources through foreign investment and partnerships.

The EPR system in Australia has been dominated by wheat. The first EPR variety was released in 1996. Over 260 EPR varieties are listed for the 2015/16 harvesting season. Of these varieties, over 130 are wheat.

However, implementing the EPR system has seen its share of challenges. “When we first launched back in 1996…we actually had almost two competing systems”, Tress says. “We had one system commence in Western Australia which I was responsible for, and then we also had a company start an end point royalty system on the east coast.”

“Initially each plant breeding company, each state government and each seed company worked independently. We really made the big gains when we came together and worked it out collectively”, she says.

The development of an EPR industry collection system began in 2007 when a number of Australia’s major plant breeding organisations formed the EPR Steering Committee.

“The key component is working with the grain growers and listening to their feedback and making changes to how we collect the EPR so it is actually an easier system for them to utilise”, says Tress. “The industry standard license was one of our first achievements.”

The EPR is ultimately reliant on the honesty of farmers declaring the varieties they are growing. “Our system works in finding ways where the PBR Act gives you the level of protection you need, and you dovetail in contract law where you need some extra assistance”, adds Tress.

The integrity of EPR collection is maintained in various ways, including harvest declaration forms and reports from grain traders and bulk handlers. An industry standard contract has also been developed to simplify the collection process. The competitive nature of the EPR system means farmers are given a choice when deciding on which grain to grow. If they are paying a royalty on seed they are growing, they want to be confident the crop is high yielding, disease resistant and suitable for their region.

Even though research and development into wheat has been growing in recent years, the industry faces ongoing challenges. While Australia has so far avoided the notoriously devastating Ug99, a fungal wheat stem rust which can cause entire crops to be lost, farmers do tackle other varieties of stripe, stem and leaf rusts across the country. Nationwide, 72 per cent of Australia’s wheat growing area is susceptible to at least one rust pathogen.

This highlights the importance of continued investment into the development of new wheat breeds.

“We need the research to create high-yielding, disease and pest resistant agricultural crops,” Professor Philip Pardey says, who was a keynote speaker at the 2015 International Wheat Conference held in Sydney.

The International Year of Pulses aims to raise awareness of the nutritional benefits of pulses as part of sustainable food production. The celebration is an opportunity to encourage connections throughout the food chain – and one Australian team of researchers is ahead of the game.

Murdoch University professor John Howieson is now working on a new licence structure for the upcoming release of lebeckia. This grain, originally from South Africa, is considered the ‘holy grail’ breakthrough to rectify the shortage of summertime feed for livestock.

The new National Innovation and Science Agenda will support further agricultural research both with research funds and through programs that bring together universities, researchers and producers. You can find out more at innovation.gov.au.

This article was originally published by IP Australia in IP – Your Business Edge Issue 1 2016. Read the original article here.

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