End point or trailing royalty — what system will we end up with?

The way farmers pay for new variety development is set to change. The federal government is currently hosting consultation meetings across Canada, gathering information and feedback from the seed  industry, farmers, farm groups, and industry, on which of two royalty options the industry prefers.

Executive director of the Canadian Seed Trade Association, Dave Carey, says that the two options being presented are an end point royalty system or a trailing royalty contract.

While there are pros and cons of each option, it’s been made very clear that status quo is not an option. The federal government is distancing itself from funding the plant breeding business, and topping up funding coffers for public programs is not one of the options being presented. (story continues below)

The two systems work like this: an end point royalty is charged as a per tonne non-refundable levy at delivery, likely at the elevator. That levy would then be returned to breeding program that produced the variety delivered. The trailing royalty contract, sometimes called a seed variety use agreement, means farmers would pay a royalty when they buy seed, and also agree to pay a royalty on any saved seed used for planting in subsequent years.

Related:  Consultations begin on seed royalty changes: How did we get here?

Carey explains that there are concerns and considerations on many sides for both systems. Producer  groups worry that if an end point royalty system is adopted, farmers may be more likely to ask for the refundable check-off back, especially in years with low prices. Farmers have also voiced their frustration over the plan for having to pay for saved seed — a definite departure from how farmers currently use cereal seed.

As of now, nothing is set in stone, Carey says. There’s still many details to work out under both systems, which is what the consultations are for. Questions remain over what the royalty rates would be and who would establish them, how funds would be distributed, the potential differences and similarities between a Canadian system and others, such as Australia.

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