Of Leverage and the Corn Research Levy

OCPA Research Reviews
Of Leverage and the Corn Research Levy
(or "How to make $1 work like $10")
Ken Hough, Director, Research and Market Development

Does the Ontario Corn Producers' Association's (OCPA) investment of about $400,000 per year (OCPA and Safety Net research and development program funds) in corn research provide a good return on investment for Ontario corn growers? The answer is a resounding YES, particularly when the total annual value of the OCPA-sponsored research programs is well over $3.7 million. This is the approximate amount of added value to the OCPA investment after factoring in the support from industry, other commodity groups, processors, and funding from the CanAdapt, Grow Ontario/Rural Jobs Strategy Fund, AAFC Matching Investment Initiative, Food Systems 2002 and resources committed to these projects within both Agriculture and Agri-Food Canada (AAFC) and the University of Guelph/OMAFRA partnership.

This is a “win-win-win” situation for each of the partners in these jointly-supported corn research ventures. Each partner, whether they’re seed companies (supporting projects on Fusarium resistance, grain quality and drying/storage, precision farming, etc.), machinery companies (tillage and sprayer technology projects), fertilizer suppliers (nitrogen utilization efficiency and potash placement projects), other crop or livestock commodity groups (tillage, fertility and Fusarium resistance projects), corn processors (grain quality, Fusarium resistance, drying/storage projects), or research institutions and funding programs, can claim significant leverage of their own investment in these research projects.

And very importantly, each – including OCPA – can justifiably claim that their own research expenditures are being applied in a very focused effort to address the top research objectives of their own organization.

The researchers themselves have indicated they benefit significantly, knowing that their research programs are targeted at the greatest needs of their clients, and through the close linkages with these partners, researchers’ results will be transferred and applied soon after they are available.

The true value to Ontario corn growers of this research effort amounts to hundreds of millions of dollars, given that most of the OCPA-sponsored projects are each targeted to improve profitability of Ontario corn growers, collectively, by more than $10-million annually. Consider how you’d benefit if a mere $5 per acre was shaved off your nitrogen fertilizer costs due to improved prediction of N availability from previous legumes or livestock manure. Or if you could improve profitability by $10 per acre by switching to reduced- or no-till corn production. Or if you could cut your average drying costs by five cents/bu. Or if you could obtain a quality premium for your vomitoxin-free or industrial or food-grade corn. Whether applied across most (or only a smaller portion) of Ontario’s two million corn acres, Ontario growers will benefit individually as they apply the results within their own operations. Collectively, the value is huge.

But is OCPA doing enough? With recent public-sector fiscal restraints, their research budgets remain significantly lower than several years ago. Although matching grant programs have offset some of the pain for the short-term, there is no assurance that each of the current research-grant programs will be around for the longer term. As well, not all are available to each research institution – we go to the best researchers for the given objectives. And several of the institutional granting agencies impose heavy administrative loads or charge increasingly burdensome administration or overhead charges or clawbacks.

And matching grant programs require that you have funds available to be matched in the first place. Certainly partnerships with other industry participants are worthwhile, and OCPA will continue to solicit these on a project-by-project basis, where the objectives coincide with the needs of each of the potential partners.

OCPA members, wanting to be masters of their own destiny, have mandated OCPA to establish a mechanism to collect grower funds to increase our support of public research on priorities identified by corn producers. The 50 cents per unit research levy on seed corn purchases provides an equitable (i.e., each corn grower contributes largely in proportion to the benefit they can expect to gain) and very cost-effective mechanism for collection of these grower funds. Eleven Ontario seed companies (Agventure, Cargill, Direct, Growmark, Hyland, Maizex, Mycogen, Novartis, Pride, Renk, and Zeneca/Garst seed brands) are assisting OCPA in the collection of these grower contributions beginning with the current year’s corn seed purchases. Contributions are refundable, upon request directly to OCPA, for growers unable or unwilling to provide the research contribution. Negotiations continue with the remaining companies to find a mutually agreeable system to collect the grower research contributions, to further expand research through OCPA which will enhance competitiveness and profitability of Ontario’s corn producers, and the agricultural sector as a whole.

This and other information about the seed-corn research contributions will continue to be published, so all Ontario corn growers have the opportunity to be aware of this endeavour. Some seed companies have indicated grower awareness of this issue is less than anticipated. Although the research levy on seed corn equates to less than 20 cents per acre, and there are many matters of far greater financial significance needing to be dealt with by farmers these days, OCPA would ask all Ontario corn growers to express their support for the research levy on seed corn to their seed suppliers and seed sales representatives, encouraging their support in collecting the grower research contributions.