NOVEMBER 2018 GERMINATION.CA 61 tially tracking every grower who uses Midge Tolerant Wheat could be easily be adapted to collect trailing royalties. “This system would also enable us to also track the use of certified seed, and make sure that a grower is not paying twice for the use of the variety.” Another benefit of the trailing roy- alty model, says Merryweather, is that trailing royalties also enable differ- ential royalties on different varieties and crops. He says differential trailing royalties would be competitive in that breeders would be fairly com- pensated for every use of the variety, with growers deciding to use new varieties where the royalty appears worth the investment. How it Might Work While there is much to still be decided on (see p.6 for details on upcom- ing consultations regarding value creation to be hosted by AAFC and CFIA), Hadley notes that an effi- cient electronic contracting system is envisioned. Similar to how canola is marketed, distributors will decide if payments will be applied per acre or pound of seed. There will be no inter- ference with provincial check-offs. Pawlik believes the end result will draw on similar situations elsewhere. In his view, an effective system must include the ability to simply and transparently track seed sold and acres planted, and a flexible pricing mechanism associated with the value of individual varieties. In Merryweather’s view, rollout of a trailing royalty system will be quite simple. “A database would be developed or modified to fit the collection of purchase information on certified seed for every grower which would then identify every purchase of certi- fied seed,” he says. “This information would be available to the licensee to administer the royalties. Growers would declare each year what crops have been planted and which variety was used to seed. After harvest, they would then declare production on each field.” Growers would therefore ‘pay on production’ and companies would then invoice them for the trailing roy- alty after verifying certified seed pur- chases and deducting such purchases (a pre-determined amount) so there is no possibility of paying twice. “The licensee would have the right to audit a grower if there was any dispute,” he says. “All such audit costs would be charged to the licensee.” Hurdles In Pawlik’s view, one of the largest hurdles would be a transfer of a sig- nificant portion of the costs associated with breeding activities to growers. But he believes that “so long as our objective remains truly aligned among the various stakeholders and parties in that we want to encourage greater investment by the private sector into cereal and pulse breeding, as well as the desire to have the strongest and most globally competitive ag sector, these hurdles can be overcome.” Along with that, Pawlik believes there will be a continued requirement for engagement, transparency, coop- eration and foresight. “This will be critical if we are to achieve the vision and reverse the tide of investment that is flowing to other jurisdictions at the expense of Canadian agriculture, farmers and competitiveness.” As with any significant change, Pawlik notes that this new system will demand the acceptance of “a certain level of ambiguity,” as well as the “patience to ensure the system evolves to best serve the needs of the participating stakeholders.” One of the only hurdles Merryweather can think of is getting agreement on the development of one system to track all aspects of the trailing royalty from seed purchase to future use of the variety. “However, we have done this with midge tolerant wheat steward- ship and on single-use agreements, so it is not that difficult,” he reports. “However, we will need to be very transparent about how the system works so that there is trust in the system by all who use it. [We will also need to get] agreement from all interested parties to ensure that trail- ing royalties are fair and equitable.” At this point, Hadley notes the task force is now reaching out to farming organizations such as Grain Famers of Ontario and Alberta Wheat Growers, and meetings and presenta- tions are being scheduled. “Producers need clarity about how it will work,” he says. “They just want the assur- ance that this program will actually increase the number of breeders and breeding programs going forward.” Pawlik is among those who believe that will indeed occur. “We can expect, over time, an expanded diversity of materials to make their way through the research stages and into new product develop- ment,” he says. Lorne Hadley is executive director of the Canadian Plant Technology Agency. Rod Merryweather is CEO of FP Genetics.