Increasing the use of certified seed a ‘win-win-win’ situation
A proposed tax credit that will cover the cost of certified seed for growers is a “win-win” for all, according to Patty Townsend, vice-president of the Canadian Seed Trade Association (CSTA).
November 14, 2008 By Treena Hein
Canadian Seed Trade Association proposes a tax credit to cover certified seed costs for growers.
|Reliance on bin-run seed has become more of an issue in the wheat industry.|
A proposed tax credit that will cover the cost of certified seed for growers is a “win-win” for all, according to Patty Townsend, vice-president of the Canadian Seed Trade Association (CSTA). “It’s a great step forward for the consumer, for the farmer, the government and the seed sector.”
According to Townsend, the tax credit will make the farmer indifferent to buying certified seed. In 2008, about 30 percent of Canadian farmers purchase certified seed, with the others using bin-run to save money. With this tax credit in place, farmers will be able to claim 155 percent of the cost of seed as an expense for income tax purposes, which offsets the additional costs of buying certified seed.
Townsend says, “That 30 percent of farmers who buy certified seed now are paying for all of the benefits that other producers and all Canadians derive from the innovation delivered by certified seed sales. This tax credit will allow the cost of innovation to be shared across the entire tax base, from coast to coast to coast.”
John Cowan, manager at Hyland Seeds, adds, “The rationale is that it’s not just farmers who benefit from new seed development, it’s the general public as well. If we spread that cost from the less than 30 percent of farmers to the entire population of Canada, we’re talking pennies per individual. If the general public were asked if it would like to support good quality bread, cookies, pasta, cereals, the staples of our diet, through breeding programs for a matter of pennies a year per person, they would say yes.”
Benefits of certified seed sales
Dave Townsend, crop manager with Syngenta Seeds Canada, says the most obvious benefit of more farmers using certified seed is more and better varieties to choose from. “Because of the use of bin run, we’re not seeing as many wheat and conventional soybean varieties being developed,” he says. “Our company starts at 5000 to 10,000 soybean plants and narrows it down to eventually get one new product to market. There’s a lot of expense involved.”
Cowan says, “I certainly understand that a farmer views certified seed as expensive. The price wasn’t this high 10 or even six years ago, but as certified seed use has gone down, it’s become more expensive because there are basically fewer individuals paying for the development and maintenance of new varieties. We’ve gone from more than 70 percent of Ontario farmers using certified seed in 2004 to less than 30 percent now. When I compare that to Western Canada, it’s less than 16 percent.” He adds, “Corresponding to this, all the seed development research in the West is government-funded. There is no private research taking place.” Cowan notes there have been numerous new winter wheat variety introductions in Eastern Canada, but “it’s been over four years since there was a winter wheat variety registered in the West.”
The argument that new and improved varieties of seed will be produced elsewhere no matter how much certified seed is purchased here is not one that Cowan views as legitimate. “That’s not necessarily the case,” he says. “And, if it comes from somewhere else, it may not be adaptable to our soils, weather, disease spectrum or other unique growing conditions.”
Dave Townsend also points out that bin-run seed is far from free. “Treatment has to be put on the seed, the seed must be cleaned, and germination tests are often done. The cost is not that much different. It is cheaper, but in the long run, it’s not.” He adds, “And of course, certified seed has a risk-assurance program with it to make sure there’s a crop, and all the support staff to go with that is provided.”
According to the CSTA, “Surveys indicate that most farmers recognize that certified seed is superior. Certified seed assures clean seed, varietal purity, guaranteed quality backed by accredited testers and graders, increased investment in new genetics for productivity, reduced input costs and access to new markets.” Dave Townsend adds that “long-term studies have shown a 1.5 to 2.0 bushel yield difference with certified seed versus bin-run on conventional soybean.”
Preparing the tax credit
Patty Townsend says her association, in collaboration with researchers and legal experts, has done extensive work to generate the research and analysis needed to support passing the tax credit into law as quickly as possible. “Our 125 seed company members have paid for all of it,” she notes.
In terms of research, the CSTA had the George Morris Centre, based in Guelph, Ont., and a trade law firm study how the proposed tax credit would fit with World Trade Organization regulations. Patty Townsend says, “They found that while the tax credit is an Amber subsidy, it is not likely countervailable, and given current notifications, it fits in Canada’s total allowable spending on Amber support.”
Benefits of crop innovation supported by certified seed sales
(source: Canadian Seed Trade Association):
Another GMC study indicates the tax revenue coming in from boosted certified seed sales could actually balance out any taxes lost to government with this tax credit. Patty Townsend says, “If the use of certified seed in general moved to 50 percent up from the present 30 percent, the government would forgo $89.5 million in taxes from farmers with this new tax credit in place.”
But a GMC study found that the increased returns to farmers and the handling system that resulted from the introduction of as few as eight new seed varieties, would generate about $61 million in tax revenue for government. It almost balances it out with only eight new varieties. She adds, “Government would also benefit from reduced draw on safety nets programs. Certified seed is recognized as an input that lowers risk by some provincial governments, and by countries around the world.”
Cowan sees other government benefits as well. “There would be increased employment for individuals in the seed product development, production and sales industries. There would be increased income for farmers involved in seed production as well as the ancillary business that work with the seed industry. This would generate tax dollars for the government and assist in off setting the tax credit to farmers.”
In the political realm, Townsend says “We met with the Minister of Agriculture, the Senate Committee on Agriculture and Forestry and the Minister of Finance. We’re now working within the election campaign. We have written letters from our association to the leaders, and prepared material for our member companies to use with their local candidates.” She adds, “We have support from the Canadian Seed Growers, some crop advisors, the Canadian Association of Agri-Retailers, and the National Cattle Feeders Association, and we continue to work with others to get more industry partners on board.”
Townsend hopes the newly elected government will act quickly to make the tax credit a reality. “We’ve done of all of our homework on this.”