Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 11 - Evidence - Meeting of February 16, 2012
OTTAWA, Thursday, February 16, 2012
The Standing Senate Committee on Agriculture and Forestry met this day at 8:01 a.m. to examine and report on research and innovation efforts in the agricultural sector. (How research organizations identify new opportunities, prove benefits, and communicate the risks and value of research.)
Senator Percy Mockler (Chair) in the chair.
[Translation]
The Chair: Good morning, honourable senators. I call this meeting to order. I want to take this opportunity to thank Senator Nolin, who is joining us. Thank you and welcome, Senator Nolin.
Senator Nolin: It is my pleasure.
[English]
The Chair: I see we have a quorum, so I declare the meeting in session. I welcome you to this meeting of the Standing Senate Committee on Agriculture and Forestry.
My name the Percy Mockler, from New Brunswick, I am the chair of the committee. I want to take the opportunity to welcome the witnesses officially.
Before we ask for your presentations, I will ask senators to introduce themselves.
[Translation]
Senator Robichaud: Fernand Robichaud, Saint-Louis-de-Kent, New Brunswick.
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Senator Plett: Senator Don Plett, Manitoba.
[Translation]
Senator Nolin: Pierre Claude Nolin, province of Quebec.
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Senator Buth: JoAnne Buth, Manitoba.
Senator Ogilvie: Kelvin Ogilvie, Nova Scotia.
[Translation]
Senator Rivard: Michel Rivard, Les Laurentides, Quebec.
[English]
The Chair: Witnesses, we want to thank you for accepting our invitation. Also, in view of the mandate and the order of reference that this committee has received from the Senate of Canada, in agriculture, developing new markets domestically and internationally, enhancing agricultural sustainability and improving food diversity, security and innovation.
This morning, we will officially recognize as witnesses Mr. Earl Geddes, Executive Director of the Canadian International Grains Institute; and also Mr. Jim Brandle, Chief Executive Officer of Vineland Research and Innovation Centre.
With that, we invite you to make your presentations, to be followed by questions from senators. I have been informed by the clerk that Mr. Brandle will make the first presentation to be followed by Mr. Geddes.
Mr. Brandle, you have the floor.
Jim Brandle, Chief Executive Officer, Vineland Research and Innovation Centre: Honourable senators, thank you for this opportunity to speak today.
I am here today to speak for innovation, but I am here today to speak for change. We have listened to the Conference Board for years tell us that we get a D in innovation, and we got another D this year, so we are failing. We have the Jenkins report telling us as much again this year. That means to me that the old model does not serve any longer, not that it did not, but that it no longer serves. We need to think about new ways to do things.
Vineland is a new structure. We are an independent, not-for-profit organization dedicated to innovation in horticulture. If you think about it, in Canada, when there is a level of public investment here and a level of need up here, we fill that gap with not-for-profit organizations. There are 163,000 of us in the country doing that job.
Not-for-profit organizations are stakeholder focused. We are there to do a job for the horticulture industry writ large, the whole value chain: distributors, processors, retailers and consumers out the other end. It is a different way to look at things.
We are about the future. Of course, it is hard to speak about the future without speaking about the past. If you think about it, agriculture itself was an innovation 10,000 years ago. That innovation was what sustained us as a species to where we are today. Ongoing innovation in agriculture will sustain us up to 2050 when we will have 9.5 billion people. We need continued growth and productivity in agriculture in order to keep ourselves alive.
Are we productive enough? I do not think so. If you look at recent OECD reports, we need to improve productivity quite significantly in order to meet that goal. What will we do? We need to have innovation and we need to be good at it. We need to have good models, good ways and high impact means to do it.
If you think agriculture is critical to our future as a nation and as a species, we can only then choose to innovate. If you think about it, we are often asked to choose between innovation and risk management in agriculture in terms of investment. I am prepared to argue quite strenuously that innovation is risk management. Innovation is the thing that brings you the new products, the added value that drives out cost and increases productivity and the thing that creates margin and margin is risk management.
What is the history of innovation in Canada? Our model is the Farm Stations Act of 1886. It was that act that helped Canada to transition from the fur trade to food production. It was very effective. I think we made that transition.
We now have to think about what the future might look like or what the farm innovation act of 2013 might be as we start to guide ourselves forward.
That old model was necessarily paternalistic. Settlers arrived in the country and were given a chunk of land. They were not necessarily even farmers and they needed their hands held to get them through the winter even. It is now more sophisticated and people are more capable and we need to think of creating a new relationship, one that is more responsive and one that understands more clearly what industry needs and how to deliver it; one that understands that it is not just research and farmers. It is research and farmers and grocery distribution and food processing and grocery retail and consumers all together.
At Vineland, the way we have structured ourselves, if you look at our board, we have everything from Jamie Warner the peach farmer to Anthony Longo, who owns Longo's grocery stores, on the board in order to shepherd the organization along the whole value chain in order to make us responsive.
While I believe there is a role for public investment in ag innovation, it is highly fragmented. No individual farmer can have their own R & D department; we need somehow to provide that. I think it is also a piece of our very essence and an important place for public investment. Again, we need to think about how we used to do it and how we need to do it in the future.
Those public programs do not operate on time scales that industry demands, so you have a three-year product cycle with an innovation system that produces a new product every 15 years. It does not work any longer. You need to align those things.
We have also seen a huge decline in the numbers of scientists working in the public sector in agricultural research. While I was an undergraduate, that number was well over 1,200 just in Agriculture Canada alone. That number is now around 500. I believe you heard testimony about that last week. That is a significant decline. Industry has grown since then and yet our innovation is declining. Has there been substitution by the private sector to take that up? I do not think so, not at the level of the decline. We need to think about how to link together what we have left. How do we do that? We have pieces of innovation and pockets of it, some of it very good, spread across the country. Now, when you put a project together, you have to think about the end point and how you can link everyone together who has the capability you need to deliver it.
We need to change. When I drill down into horticulture, of course, horticulture is a big piece of our agricultural economy. It is a $5 billion business across the country at the farm gate. We are the health and nutrition, exercise and positive lifestyles people. We are fruits and vegetables. We are the grass you cut and the garden that you plant, all of those good things. You want to have that in society. We are an essential piece of food sovereignty. Food sovereignty is an issue around horticulture because, again, you have about maybe 144 crops spread across the country; they tend to be smaller and can disappear more easily. You do not want to lose the capacity to be able to grow your own food, but it can happen as we lose our ability to compete, mainly around productivity issues.
If we want to keep horticulture and keep our capability in agriculture, we need to change our innovation systems so that we can align our capability with industry needs and consumer desires so that we are actually doing things that people want done. We need to defragment that existing capability and link it into pipelines. You have to have all the partners together in a pipeline to create a project so you can see right from the beginning out to the end. You know where you want to go and you have all the partners along the way to say, this is where we want to get. We have to speed innovation. We have to innovate faster. We have to focus on productivity. With horticulture, particularly, labour is a huge cost in the industry. We rely a lot on offshore labour in the industry and we really have to automate more and quickly in order to get our costs down and be competitive.
All of those things and better innovation means, of course, growth and success in Canadian horticulture. It means jobs, food security and sustainability. The simple equation is that horticulture equals health and prosperity and better innovation means a better life.
Our core breakthrough as an organization in innovation was this: When I initially started, I was asked to choose between two models. The first of those models was private sector research and the private sector we know commercializes research very well. The second was public sector research and the public sector does research very well. One is more short term and commercially focused and one is more long term and discovery focused.
I was told to pick one and the one to pick is the private sector model. Then you go back to the public sector, tell them how bad they are and ask them for help. That did not go over very well. It turns out the real truth is that it is not an either/or choice.
You want to put both of those pieces together in one organization and say, well, why do we have to choose? We can have research capability together with commercialization capability in one organization driven by a business-oriented board. You can have synergy and be better than what was there before. You become focused on that end point. We want to have two and a half feet of shelf space in the grocery store with this product in it, whether it is mushrooms or yard-long beans for Canadians.
That brings me to the core model, the principles you need. You have to have the right consumer concept, something people want or need. You have to have the right science and scientific partnerships. Again, we have science excellence across the country that has been invested in for years at all levels of government. Let us leverage it and use it, bring it together, make sure it is the best it can be. Then you need the right commercial partnerships. You have to have the right people with the right horsepower at the end of the pipe to take it to the next place.
Vineland is not in the distribution business, the crushing business or the vegetable retail business. Someone else is better at that and we want them in as a partner at the beginning.
As an example, to cap this off, we have a project called feeding diversity. As you know, Canada is a nation of immigrants. Every five years, we get a million or so immigrants. Half of them come to Ontario and about 80 per cent of those come to Toronto. Most of those new Canadians are either Indian, Chinese or Afro-Caribbean and they come from regions where vegetables are a huge part of their diet.
Our strategy up until today, since 1886, has been to teach them to eat European vegetables, to teach them to eat turnips. That is not working. They have their own needs and choices. In fact, when you ask them what they want, it creates an experiment. In that experiment we can say, out of those vegetables we can grow 12 of them in Canada, no problem. Then you link together your value chain again.
The Chinese community alone spends $400 million a year on vegetables in Toronto. That is a big opportunity. You have farmers, scientists to do the trials, grocery distributors into the right grocery stores to deliver those things. That is the kind of thinking we need to foster.
In the end, we try to catalyze partnerships to grow horticulture. How does Vineland make our 60 people into 6,000? We do that by creating partnerships with other people with other capabilities and leveraging everything into this one outcome. That shifts the model from the old days, which was really all about me. I was a scientist for 22 years, I know exactly what it is about and it is about me, what I want to do and what I am interested in. How do we shift that now into this more partnership oriented and connected model? When you connect and innovate, you have greater impact for less money and it takes less time. That isolation model has to go.
What do we see in the future? What does it look like? In my mind, one of my dreams is that all the sectors like the canola or pulse sector, they all have innovation strategies. Those strategies are aligned with the national food policy and we all know what direction we want to go in. The second thing that has happened is we have created a shift in the way we do innovation so that the old ineffective and highly expensive model is over and we have created a new high- impact model that is very responsive to industry needs, consumer needs, et cetera.
With that, I am out of words. I am done.
The Chair: Thank you.
Mr. Geddes, you have floor.
Earl Geddes, Executive Director, Canadian International Grains Institute: Honourable senators, it is a pleasure to be here again. I will work through a quick presentation that is fairly formal, but it sets out some of the issues I want to raise with the Senate in terms of research, development and innovation.
I want to begin first by congratulating you for picking up this topic and exploring it in a major way so that Canada can improve its performance hopefully from a D to a B would be nice, but we would like to go to A-plus. Let us start here and with the work you are doing, hopefully we can move down that pathway.
In essence, I can make three short statements. That would be that agricultural research makes a lot of profit for Canadians and for farmers. We know that. There is not enough money being spent on research in Canada to keep Canada competitive globally or not spent properly. The research that we do undertake often does not get to the market place. You can stop there, but it is not as simple as making a statement like that.
The solutions are not as simple as just finding more money, either. We need to be sure what we are doing in terms of research and development and finding innovation pathways allow us to bring some of the good ideas we have developed through research in this country into the market place. That is what I would like to speak about this morning.
At CIGI, we believe innovation requires a receptor. This is a term that we hear in different environments. Where we are looking to be successful in moving a good idea into a profitable market position, there needs to be an entity of some type to receive that innovation, to finance that innovation and to position it in the market place. If you do not have a receptor, when you start down the path of innovation, you will most likely fail. I will talk about that in an example later.
At CIGI, our receptor is always the customer of a Canadian field crop, whether they are consuming that innovation in terms of feed, fuel, fibre or food. From where CIGI operates, we see Canadian university research is generally focused on training students, proving a hypothesis or creating an opportunity for the next research grant. I guess that is useful. This is kind of the exact opposite of the U.S. research college grant system where the researchers need to constantly be generating new ideas because the researcher is responsible for the extension of those new ideas to the consumer or the receptor which may be a farmer or an industry.
It is important to develop new grad students. We understand that. However, the research undertaken could have a sharper focus on an output or market and still develop grad students effectively.
CIGI works very closely with researchers at Agriculture and Agri-Food Canada research stations, where the focus is usually on discovery research, solving problems or creating good ideas. We have seen that AAFC has placed intellectual property protection on most of their good ideas and, as a result, many are still waiting for someone to pull them into the marketplace. There are quite a few pieces of intellectual property, or IP, on good ideas have been developed with public research dollars that never go past getting the IP on them, perhaps because of that.
Many of these good ideas should be in the marketplace and as time goes on these ideas lose their potential value. We have funded them, protected them, no one used them, and they are no longer of any value.
In its farmer industry mandate, CIGI approaches with an attitude that the good ideas we generate from our research should be utilized to their maximum extent to improve market opportunity for Canadian field crops, rather than to earn a royalty for CIGI. It is a different approach or concept. It is to make things better for people, not for us.
At CIGI, we see research and innovation as taking a product, a good idea or a need and creating a profitable market opportunity. The innovation pathway chart I have provided shows how this process works at CIGI. We are talking about the intensity of activity in the various elements of research. When you are looking at basic research — whether it is universities, Agriculture and Agri-Food Canada, or the Grain Research Laboratory — the further away from reality that the hypothesis you are trying to prove is, the more intensity there often is in the research. It comes down into this pre-commercial area just slightly. On the other side, coming into the marketplace — the food development companies, the commercial companies — the closer they are to the market, the more intense the research is, and the more willing they are to put money into it. We are finding they will come down and do a bit of pre-commercial work in a laboratory, but they are mostly venture capital companies coming close to that commercial line before picking up a new idea. McDonald's does not do any of their own food product research; they wait for someone to bring them ideas. It is very different from the way it used to be.
The role we have at CIGI is in between the basic research and marketplace. We do not take a product to the market; we take it to a point someone will invest in it and take it to the market. It is taking research and pulling it into that. That is what we call our research or innovation pathway.
I would like to share three examples to emphasize what I am talking about. The first one is taking a crop that Canada has a surplus of, which often ends up being sold as chicken feed in South Korea, and how CIGI is turning it into a sought after principal ingredient in Asian noodles. That crop is durum wheat, which is principally used for couscous and pasta. Canadian durum varieties are the best in the world. That is the result of research at Agriculture and Agri-Food Canada. It has never been used for noodles in Asia, however, and that market is huge. There is more wheat consumed in China alone for noodles than we produce in North America. It is an important market. Why not use durum for that?
The second is research into a food barley product that is processed here in Canada. CIGI, in collaboration with the Canadian Wheat Board, Agriculture and Agri-Food Canada, and a number of food development companies, went a long way in demonstrating the value of barley in food products and developed a number of food products. However, funding for the research ran out before getting close enough to the market that a customer or consumer from a venture capital company would invest.
We had a call from the Innovation Norway in Toronto last week, and said they want to make food barley in Norway. Everyone said go see CIGI. They are coming to see us next week. We will help them take research done in Canada, with their investment dollars, and they become the receptor and bring it to the marketplace. Most likely the research done in Canada will be first utilized in a food product in Norway.
The third one I would like to talk about briefly is a customer we work with in Atlantic Canada that is a formulator of products. There was a customer in Germany that had a need in an industrial plant. They did not know what the product was to solve the need. They came to CIGI; we had worked with them before. We work with a number of different players in Western Canada. We had a mustard company in Saskatchewan that had waste oil. Mustard flour goes into the paste that you eat, and mustard oil is a waste product. You knew from historic research knowledge — generated largely by Agriculture and Agri-Food Canada — that if you combined that oil with some processed canola oil and added organic ingredients, you could create unique products. That company in New Brunswick is now selling mustard oil from Saskatchewan, and canola oil from Western Canada, in a combination product used as an organic degreaser in the industrial system in Germany. That is just a different innovation pathway.
In closing, what we think is missing in the equation in Canada to make us more successful is funding innovative or basic research and taking it to a point where a commercial customer will pick it up or a venture capitalist will invest in it. We quite often drop it just before the gate. It is our hope that through your discussions, and through the Growing Forward 2 discussions that Parliament and the provinces are considering, that the funding process Agriculture and Agri-Food Canada has in this next five-year agreement will focus on getting ideas right to the marketplace. The systems we have in place in Canada can deliver on research results rather than stacking them up as good ideas. We will leave it there.
[Translation]
The Chair: We will begin question period with Senator Robichaud, who will be followed by Senator Nolin.
Senator Robichaud: In its study on forests, and research as it relates to forests, the committee observed what you just mentioned: people in the forestry sector do research, but before it becomes marketable, it winds up in "death valley."
[English]
There was a space where it would go and stay there. You both mentioned that. Is there some kind of a psychological blockage? Why is it that we cannot put things together? We know that is where the problem is and we are missing the boat. You showed three examples of that.
How do we work it out? What do we put in our report in order to try to somehow get away from that valley of death?
Mr. Geddes: This is a conversation that could take up the whole two hours. Our view is simple. When you look at this, you have to look at who the players are. We do not play well together in this country. We have researchers and it is all about them, the products they want to develop, and the ideas they have to prove when doing their research. They do not really care, as long as they can write a paper, do a poster and get published. That is crass, but quite often that is what happens. In agriculture, we are down to the Farm Credit Corporation. There is very little venture capital left in agriculture and that is because we are handing them ideas before they have a market-proof concept with them.
Our approach to that has been this pathway, and finding the receptor. Who is the receptor for the research we are doing? We are doing research with Pulse Canada right now on milling pulses in four different technologies to create different fractions and functional properties we can use in food ingredients. Our first receptor on that research is Buhler Equipment in Switzerland because when we are finished, they want to build the mill that works best.
As we start doing these pieces of work, we are collaborating not with other people interested just in what we are doing, but people who can take the idea to the market place and have a reason to do that.
I think that is part of what is missing for me, senator.
Mr. Brandle: Just to add to that, of course, it is part of the research culture. If you think about our educational institutes and the way the model is built, it is a confederacy of isolates. It is a bunch of individuals that act on their own and they do not necessarily act together unless they are forced to do so through programming or other means. That culture is not there. It is all about individual achievement.
Success is not landing that new durum wheat variety in the marketplace. That is not how you are measured when you work in an organization like that; you are measured on academic criteria in terms of your achievement, so you work to those goals.
The missing piece is, of course, the way the whole thing is structured, hence the call for new models. I wonder whether it is tweaking that is required. There is more than that. You have to blow it up and start over again. If you really want innovation and high-impact innovation, you have to do it in a different way. You have to say, "Okay, we want to build for success. This worked for us great from 1886 up until 2012. Now we need to think about a new way to do it — one that is connected;" that the intent at the beginning is that outcome in the marketplace, in your refrigerator, or in your pantry shelf that people have to think that way and they have to organize themselves and assemble these things together so there is impact.
It is a matter of intent, as well. People work to what they are expected to work to. If you work to what you are expected to and if you are measured based on your scientific publications, if that is how you get promoted in the system and paid and rewarded, that is what you will do. The outcomes are an accident. That someone finds this thing and says, "I read this paper" and maybe then it moves into the commercial sector, but there is not an expectation to do that in all cases.
We have to create that. That is part of the responsibility of the people who resource these programs and projects.
Senator Robichaud: Are there efforts — I am sure there are, but tell me where — to take the researcher from pure research to a product that is marketable and profitable for the people through the whole chain?
Mr. Brandle: You would say agri-science clusters. I think Senator Buth knows that program very well, but there is an effort to bring whole groups of scientists together with industry. Depending on which industry you are working with, I do not know if you necessarily connect to the value chain or you necessarily have the consumer outcomes, but I think that conversation is starting to happen. That is one place.
You have the Ontario government and the federal government investing in places like Vineland, whose intent is exactly to do that, which is to fill that gap and to say, "That does not exist in any project we will do anymore."
Those are the points of light that I see. Of course, I would argue that these are the places where investment needs to go in the future. I think we have too much focus on innovation in declining opportunities and things that are not working anymore, and trying to save this, that, and the other thing. Innovation is about the future, not the past. That is another piece of it: to be able to say no and get out of things that we are not good at anymore, that are over, or whatever it is.
Mr. Geddes: If I might respond to Senator Robichaud's question, there are some positive signs, even in the conversations that Agriculture and Agri-Food Canada is having about their funding for their next set of programming. They are talking about needing to have output results, not just more good ideas. There is certainly an understanding that we need to improve our ability to innovate and to move innovation forward in Canada. We can do lots of innovation, but unless they have a receptor, someone who will take your idea into the marketplace, you might as well do something else.
At the risk of offending some of my previous and current partners, one of the things we at CIGI have always struggled with is that our receptor, quite often, was the Canadian Wheat Board. They were going to use the innovation from a marketing standpoint. We recognize that is not moving those products forward. The durum flour for noodles in Southeast Asia will move forward much more quickly now than it would in a previous environment because of the role the Wheat Board had. The food barley piece — we did most of that work assuming the Canadian Wheat Board might market some food barley instead of saying, "Who was the food company that we needed to have at the table to move it forward?"
Understanding that connection to the market in the research we do and funding it properly instead of just funding the good ideas will be critical going forward.
Senator Robichaud: You seem to say that Agriculture and Agri-Food Canada has understood that there should be a little bit more concentration, to work it through. What about the universities where there is a lot of research being done?
Mr. Geddes: Our Canadian university system is still very much designed and focused on educating young people to be good researchers, to get their masters, to get their doctorates. The theses they write do not have, in many cases, applicability into the marketplace. It is often a part of a research project-granting process that allows the professor to get another research grant for his next graduate student, rather than based on putting products into the marketplace and evaluating them.
Senator Robichaud: So we have work to do there.
Mr. Brandle: There are models. If you think about Waterloo engineering, computers, electronics, and all the work they do there, that is the model. It does not exist as much in agriculture.
I might say that the Crop Development Centre in Saskatoon is a potential example of what you would want: That greater level of connectedness. Let us take those, because there is nothing wrong with education. It is critical. They do that job really well, but really can we expect universities to be all of that?
Therefore, you then need those ancillary structures, whether they are associated institutes or organizations like mine, or the Crop Development Centre, that are connected to the university that rely on their academic excellence but are really there to do the plant breeding for the grain sector, for example, and things like that. There are pieces that exist, and I think it is those pieces that you have to look at and say, "Okay, if we need better innovation in agriculture, let us stop doing this and let us start doing this." What is working? What do we need for the future?
If you outcome focus it, you create new structures that do that.
[Translation]
Senator Nolin: I have two questions, one of which involves our witnesses' activities involving their international colleagues, and another about intellectual protection, as raised by Professor Geddes.
[English]
Last Tuesday night, we heard from the wine growers and apple growers. We had a long discussion about the provincial barriers; it is a special market, so I do not want to get into that with you. It is unique to them and we understand the problem and the relationship with the provinces.
My question is more focused on the fact that some part of their testimony was driven by the support that their competitors from other countries, the support they have from their own government. I am curious to hear both of you on what is happening in your field of work outside Canada. Are the results as good as us, worse, or are they better? I want to hear what we should do. Should we change in Canada to have a better performance in your area of expertise? That is my first question.
Mr. Brandle: I can start.
A good example in the horticulture sector would be in New Zealand. In 1995, I do not know if we all remember but there was quite the economic crisis and that country was near bankruptcy. In an effort to save themselves, they took all their research scientists and threw them in the lake and said, "Sink or swim." While kind of a draconian approach —
Senator Nolin: What was the result?
Mr. Brandle: It has been very good. They did lose a few scientists, but what has come out 20 years later is, effectively, an independent organization — it is a for-profit organization. Mind you, it is like a Crown corporation: There is only one shareholder and that is the Ministry of Agriculture and Fisheries in New Zealand. What they have created is a very industry-responsive machine that drives innovation in New Zealand agriculture. Of course, agriculture is very important to their economy. It is heavily export-based. They have come up with some extremely good things. Kiwi fruit is a good example. It is a $1 billion industry and it continues to grow. It is all about innovation, and it is all about that organization and their ability to work with Zespri, which is the commercialization arm of the kiwi fruit piece. Another example would be calla lilies. They created that, and on and on. That is a very business-based organization. It is still largely funded by government. They have a certain proportion of their funding coming from outside, but they have a big contract that they have to compete for on a regular basis. That drives them to do exactly the task that you want, which is to create outcomes in the grocery story. Agriculture research is about environment, it is about health, but it is also an economic development activity in any way you want to look at it. I think they have a great model.
Australia works in a different way. Senator Buth knows about that. They have these rolling, funded, almost not-for- profits. You buy shares, effectively, in the virtual innovation organization, and these get funded for seven years and potentially for another seven. You get growers and crushers, whoever comes together, to sit around coordinating this and funding the research. Those are a couple of models.
In Canada, we have us.
Mr. Geddes: I would like to speak to it in a little different way. Our experience in research is almost always with a commercial entity. We do not do very much government research at CIGI. We will take the results from government research in Canada. It has a fair bit of funding in it, but my contention would be it is not always properly focused. I can give three examples. One is the noodle example I talked about with durum wheat flour going into Asian noodles. We worked with one Japanese company. We gave them 18 months exclusivity to the process we developed with them, and now we are marketing it to other companies. That was directly with a commercial entity. There were zero government dollars involved. We are a non-profit.
Senator Nolin: In other countries, do organizations like yours work differently for a better result, or do you have such a good model or such a good way of operating that others are doing like you?
Mr. Geddes: My second example will take us to this point. We are leaving Saturday and going to China. We will talk with Cofco, which is one of the large importers and millers of Canadian grains, whether peas or wheat or whatever it is, to develop a research development and training agreement with them in this new environment. It used to be the Canadian Wheat Board would bring us participants from there to train and do research with. We are now developing our own agreement with them. Part of the agreement is linking to the Harbin University complex, which does most of the cereal research, funded entirely by the Chinese government. You do have a commercial, but you are connected to Harbin in terms of the activity you are doing. Does that work better? Probably. Harbin, fully funded by the Chinese government, provides a good research basis for growers in China. That model works all right.
When we look at the work we do with Warburtons Bakery in the United Kingdom, again, it is fully commercial, but they are using U.K. varieties that are funded by the public breeding system in the U.K.
The institute closest to what we do at CIGI is the Northern Crops Institute just south of us in Fargo, North Dakota. It is funded as a university institute with federal government dollars coming in and some industry dollars coming in from grower groups, whether on pulses or cereal crops or whatever crops they want to focus on. Their model works pretty well. What they do not have in their model that we are building and have always had it in CIGI but you have never formalized it as commercial is this relationship with customers overseas. People will come there from time to time for training. They very seldom go back out to fix a problem in a commercial entity's plant, to understand what the innovation requirement is or what the need is that you can develop a product or a process for.
We see varieties coming out of France that we compete with on a regular basis. French research is very good in cereals. The German research in cereals is well funded by the German government. Would we expect Canada to do the same? Certainly, I think so. We talked about the GRDC in Australia, and its farmers put in a dollar a tonne and the government matches it one or two times depending on the need. There are many different models out there. What do we need and how do we build our own model instead of picking someone else's model? Let us build our own out of what we know is out there and the models we can use.
Senator Nolin: That brings me to the second question. You mentioned protection of intellectual property. You seem to have a cloud on that system of protection. I would ask you to give us more about what is wrong with the protection of intellectual property. Should we do it? I presume that you are not asking us to get rid of the protection of intellectual property, but maybe doing it differently.
Mr. Geddes: I raised the issue, so it is a perfectly fair question for you to ask. I will put it in this perspective.
I work in a non-profit institute that gets money from farmers and from the government. My job is to promote or make the opportunity for Canadian field crops better and more profitable all over the world. We created a sandwich noodle. We have a sheet of durum flour going into a sheeter in a noodle plant, a sheet of Canadian Prairie Spring Red wheat flour going in the middle of it, and another sheet of durum flour coming in the top. That is the only way we could make an udon noodle that this Japanese company that we worked with would say, "Okay, I can do udon noodles; I can do anything." They never thought of doing it. This is a process we could have easily patented. It is not used anywhere else in the world. We are going to use it with pulses, because when you put pulse flour with wheat flour in a sheeted product, it feels like sandpaper in your mouth. No one will eat it. You put it in the middle, you remove the flavour, and you get all the smoothness of a wheat noodle. Had we patented that and were now trying to sell this patent to people who do not actually use durum to make noodles, how successful would we be?
Senator Nolin: The problem is not the protection.
Mr. Geddes: We give 18 months protection to this one company, and now we are selling it to everyone. Our job is to make the most use of the innovation, not to fund CIGI by the fact that we created something new.
Senator Nolin: It is not the protection but the value associated with the protection and the structure of that value. Should we let go of the revenues or the value of the licence in the beginning and increase at the end? I do not know. That is why I am asking you.
Mr. Geddes: Again, our view at CIGI would be that if you are going to put protection on something so you can claim that it was the wonderful idea that you created, that is fine. If you are doing it to fund your research in a public research institute, you are likely just putting it on the shelf.
Senator Nolin: Mr. Brandle, you seem to have a different view on that.
Mr. Brandle: You in fact did protect your intellectual property, and you turned it into a trade secret instead of a patent. Effectively, it is protected.
I certainly am in favour of patents. Patents are a good way to do business, and it is a good way to create partnerships. There are many companies on this earth that we live on that will not work with you if you do not have one. Effectively, if you do not patent things, it throws the value away. Since you have given it away and you cannot protect it, there is no angle there for anyone. The second they use that idea in one of their processes and work it all out, then everyone else can copy them.
There are positives and negatives, and the problem with intellectual property in the hands of the wrong people is that if you do not market it, if you do not have a place for it to go and you do not have an intent, then it becomes a waste of time. It is very expensive. Your average biotechnology patent might cost you $100,000 altogether, so you want to know that there is a customer out there for that piece of work, but to know that protecting it is key. I can only think if we would have filed patents on all those canola improvements, just the revenue that would have generated, unbelievable, over and above what it already does and ongoing. There is a real place for intellectual property, but it part of your organizational strategy. You can black box things, trademark things, copyright them and patent them. Sometimes the best strategy is just to give it away.
Senator Nolin: Should we explore that more? Should we invite more witnesses to explore that area?
Mr. Brandle: It is a key piece. Patenting became popular in the organization where I worked in the late 1990s. We have invested a lot of time in it but it was the marketing piece and the strategy piece that you have to have. You have to have a strategy. Where are you going? If you want to get there, what do you need? You need these patents and to give away these technologies. It is a piece of your arsenal that you absolutely need never say, no. I am happy if anyone has IP on the shelf because we will take it.
Mr. Geddes: There is lots of IP on the shelf. Canada has it piled up all over the place, and I know the people who have it piled up. It is not that intellectual property protection is wrong or bad because it is required in certain circumstances to get the investment to develop the products. The piece that we see in innovation is in many respects that it is urgent and immediate because you are dealing with a need, quite often, or a new opportunity. Those needs and those new opportunities will be filled by something else if you cannot get them into the marketplace. If you are going to spend a bunch of time just patenting it, because it is a good idea, someone will go around it. It is not unlike our wheat genetics in Western Canada that are all pretty protected by our system. The life science companies, who are going into wheat breeding in a major way, are building around it because they cannot get access to it. Pretty soon it will not be worth anything. Patent protection is not bad, but if you do not have the strategy to put the products in the marketplace, it is just wasting money and research.
Senator Mercer: I am anxious to hear Senator Ogilvie's opinion because he is a scientist and has done a lot of research. It seems to me that a lot of good ideas are sitting on the shelf because they are only ideas. If you cannot commercialize the idea, then it is only an academic exercise and probably deserves to be sitting on the shelf. If there was any money in it, someone would come along and find a way to develop it. Universities and other research institutes survive on their successes and become self-funding. I refer to SickKidsin Toronto where they invented Pablum and created the SickKids Foundation, which has done tremendous work over the years. It all came from that one invention many years ago.
We talked about laminated lumber in our last study, chair, and today we are talking about laminated noodles. My question is about the role of Agriculture Canada and their research centres. Do you think that they play a useful role in the development process of new products? Mr. Geddes, I refer to your comment when you talked about the development of durum wheat work for pasta and couscous and that durum is the best wheat in the world thanks to Agriculture Canada researchers and plant breeders.
Mr. Geddes: My response is, yes. The research centres at Agriculture and Agri-Food Canada across the country deliver a lot of really good new products into the marketplace, generally with a focus as to what the marketplace wants to have. In many cases, the research centres that work on new product ideas or innovations and get the innovation from research to the marketplace are struggling with that because of this "death valley" piece. There is no consistency in the funding or the approach to take that research to the market. Senator Robichaud raised with the forestry industry the "death valley" concept of not completing our work. Mr. Brandle mentioned this in his discussion. How do you take all this stuff and make sure it gets to an end use all the time?
The wheat breeding program in Western Canada has delivered a lot of world-class varieties. Has Agriculture Canada's research centre created any of these other new uses pieces? Not so much, but I guess that is our responsibility.
Senator Mercer: Mr. Brandle, you talked about the ego of scientists. Coming to Ottawa and talking about egos is taking a big risk because this place is crawling with them. One of the issues is that we do not celebrate the successes of the scientists. We do not know the names of the scientists who perfected durum wheat; at least I do not know them. These should be household names. We know the names of the people who invented insulin. When talking about Canadian scientists, you are hard-pressed to name the superstars, other than Senator Ogilvie, of course. Should we not be celebrating these scientists to draw more young people into research science?
Mr. Brandle: You are absolutely right: We do not know who those people are. Who were Keith Downey and Baldur Stefansson? Senator Buth knows.
Part of it is the science culture; we are not all outgoing? First, science tends to draw people who are more thoughtful and introspective and less likely to be celebrated or even want to be celebrated. Second, the only celebration scientists crave is that your peers. Whether your neighbours know what you do, you are not so worried, but if the guy down the hall is impressed with what you did, that is big. I agree completely that we should do more. I know that at least some of our most celebrated scientists have received the Order of Canada, for example, Keith Downey, Baldur Stefansson and Vern Burrows. I am not sure how we could celebrate them more and make them more important to society. I agree with you wholeheartedly that if we could celebrate them more, that relevance would bring more success, more investment and more recognition to the sector.
Mr. Geddes: I would agree with Mr. Brandle. We have seen a number of senior scientists who work in agriculture recognized with an Order of Canada. Do we promote that very much? I know they are proud of it and they feel proud of their accomplishments and receiving the Order of Canada. That is a bit of recognition.
As Canadians, we do not celebrate much; we are pretty humble. Give the successes that Ron DePauw has had in wheat breeding to an American and just watch the flag waving. We are a different culture in that regard. Do we need a change? I am not sure that we do because when you travel around the world to commercial customers of Canadian canola, wheat or other crops, they often know who our breeders are. There is recognition in the marketplace for what we are accomplishing in Canada. Can we celebrate more? Sure. More successes would give us that celebration mode.
Senator Ogilvie: I am a little worried about how complimentary Senator Mercer has been this morning. I do not know what is behind this. I will be very careful for the rest of the day.
Gentlemen, I found this quite fascinating today. I see a very traditional industry that suddenly is emerging into a knowledge-based era. The issues you have been talking about arise when you have long-standing attitudes, behaviours, positions and investment attitudes, and so on.
The agriculture community has in fact been itself one of the reasons that there has not been a lot of evolution in innovation. It has been a highly traditional area reluctant to change practices, and so on. It is usually not oriented to producing materials that are subsequently transformed into traditional value-added products or extracts from them and are becoming more valuable than the original plan.
What you are describing today is really an industry in that transition. The issues of intellectual property versus know-how, versus trade secret, et cetera, are simply the characteristics of any competitive industry. The individual company decides, as you have described, Mr. Brandle, what is in its best interests in terms of moving forward. Quite often, simply a trade secret is the best way to deal with a transition through some new development in the industry versus a patent, yet as you have correctly described, patents in this area are now essential.
To give you some specific examples of the resistance of agriculture in general, Canada had no plant breeders' rights — I know because I was on the committee that recommended the government bring in plant breeders' rights. A long time before that, farmers themselves were among the most resistant to the idea that there should be any plant breeders' rights. However, when we reached the biotechnology era, it became limiting. You mentioned calla lilies, for example. For a while, foreign developers of intellectual property knew plants that served one market or another would not allow them to come into Canada because there was no protection. In the modern era, all you have to do is take a leaf off the plant and clone the whole thing and have a new crop.
I will take exception to the idea that the academic researchers have been the problem because they attempted to push the industry for a long time. If we look at Agriculture Canada research labs associated with universities, the University of Manitoba, for a long time, was the one trying to push farmers and the other end, the industry, into using the technologies, the techniques and the new strains they had developed for producing new breads, and so on, that would have potentially a new market and would have found great resistance. I do not think that fundamental research has been opposed in Canada to developing ideas that would lead to products and move on.
To give you a specific example, the Plant Biotechnology Institute in Saskatoon was the first in the world to clone conifers. You are dealing with grains, but in actual fact we deal with forestry products, and so on. This was a major breakthrough. It was an international challenge to find a way to clone conifers. Do you think the huge Canadian forestry industry had an interest in acquiring that right? No; so it was sold to Scandinavia.
If we take the examples that you gave, Mr. Brandle, in terms of what has been developed without protection, the agriculture research station in Kentville, Nova Scotia, is responsible for developing some of the world's leading strains of strawberries. In fact, the three leading producing strains around the world emerged from there, but there was not even an interest in Agriculture Canada in protecting that. The revenues from that alone would have funded all our Agriculture Canada research, had there been a patent in that area.
My experience is that there is not a lot of intellectual property sitting on the shelves in various university agriculture faculties and research Canada labs because very little was applied for in terms of formal patents, and so on. Indeed, the greatest reluctance was on the part of the industry to consider it. The one thing that leaps out from your report, Mr. Geddes, which is 100 per cent correct, has been the huge lack of receptor capacity in the industry for new ideas, innovation and moving forward. The reality is that it is not limited to agriculture in Canada. Our greatest single drawback is that our receptor capacity in industries across Canada seems to have no willingness to recognize the importance of innovation. In fact, you cannot even adopt innovation developed elsewhere unless you have an innovation culture in your organization. You cannot because you do not know how to deal with it. That is a fact.
What I would like to say to both of you, particularly to Mr. Geddes, is that I would bet serious cash, now that the industry, largely pushed by the evolution of grains into the oils — and it has really been the oil aspect of it that has moved a lot of innovation there — as well as new agricultural products such as the vineyards in Canada, where they actually spend real money to protect their products, move it forward and enter new markets, as we move through this new era, will cause the researchers to be excited about actually being able to work with an industry that is capable of understanding or at least considering the ideas that are emerging in their laboratories.
I am delighted with the approach you are taking because that will push the research institutes and the academics to take this into consideration. It will also push your industry members because, if you are going to back that up, your industry must be capable of interfacing with those new ideas.
Rather than being at all discouraged or any attempt to protect one aspect of this area from your conversations this morning, I would urge you to take, perhaps, a more optimistic look at the research side in the institutes and say to you that I believe we are in that transition phase in a highly traditional industry, and I really like what I see and hear from both of you.
The Chair: That was a question. Are there any comments?
Mr. Geddes: This would be the first time I have not come across as being optimistic. I kind of temper the excitement that we have at CIGI. I agree completely in that I think the research scientists, the industry and the consumers globally are more engaged and engaged right now than ever.
I will refer to cereal crops. About two weeks ago, I was in Saskatoon at the wheat summit that the Government of Saskatchewan put on. It was a fabulous event. Every life science company in the world was there talking about the future of wheat. The premier was talking about creating a wheat innovation centre and how to ensure that we, as Canada, can reassume our role. We all went to school and thought Canada was the breadbasket of the world; it is really the steam bun and noodle basket of the world. How do we regain that? From research investment. There is a lot of excitement around that.
I appreciate your comments on the universities. When I look at my own alma mater, the University of Manitoba, when I went to university 40 years ago, that university had an extension responsibility, but Baldur Stefansson took to the country. They do not do that today as much. That is where we have a bit of a grind compared to what they are doing in U.S. grant universities. That extension responsibility is gone. Do my grad students' projects need to be relevant or not, or am I just training grad students? Not all universities are like that. If I insinuated that across all universities, then that would be a mistake on my part because not all of them are like that. There has been a shift in many of them, though, away from extending the research that they are doing because others that have taken up that role are not doing it at all.
In my lifetime, this is probably the most exciting time period that I have ever worked in. It is very exciting.
The Chair: Mr. Brandle, do you have any comments?
Mr. Brandle: While we are in that transition, we are transitioning very slowly and that will cost us. In part that is happening is because of the shrinkage in fragmentation. While that enthusiasm might be there, we already know that Agriculture Canada has the biggest asset in the country — the universities as well. It is that change in mandate, that shrinkage, which is causing this transition piece to end. What we do now is produce innovation reports instead of innovation. We need to get on with this task, just do it and get it over with so that it is done. I would not say more than that.
[Translation]
Senator Rivard: Following your two very comprehensive presentations, the good questions put by my colleagues, and especially your very good answers, I think we have done a thorough review of the situation. However, I would like to go back to one of the first statements you made.
I believe I understood that federal funding goes mostly to marketing, and that very little is invested in research and innovation. Have you evaluated the amount you would like to receive from the federal government in order to do more research and innovation over a period of at least five years, so as to avoid what was referred to earlier as "death valley"?
[English]
Mr. Geddes: Yes and no. From our perspective at CIGI, we are working with Canadian field crops in general. We work with soybeans in southern Ontario going to Japan as food grade soybeans. We work with wheat from the Peace River area of British Columbia that is being used for noodles in Southeast Asia. We are comfortable that the money going into agricultural market development support has probably been adequate. Our concern is that some of those dollars are directed not entirely correctly in terms of following those ideas through to a point where a commercial customer will actually pick up the idea and run with it. I will use the food barley piece as an example. It is an excellent piece of work, funded almost entirely by Agriculture and Agri-Food Canada with some money from the Canadian Wheat Board, so farmers from Western Canada put money into it. They got it to a point where products were developed, but those products never got the market testing so that a venture capitalist or a commercial company would pick them up. You are just short that one piece. Because of the way funding is done, there is a lot of difficulty around applying for funding for different things right now because of government rules and regulations. I understand those are necessary. It is difficult to carry that particular project on without an industry partner willing to come to the table. Today, they are much less willing to come to the table at an early stage than they were even 10 years ago. You need to be much closer to the market, to where they will invest their dollars and put their intensity into dragging it into the market place.
How do we channel some of the dollars available from taxpayers to support the industry, which, in turn, gives a huge benefit back to taxpayers, to pull those products closer to the marketplace? Is it quantity or direction? I would say it is more direction than quantity of dollars.
Senator Nolin: I have a supplementary.
The Chair: One minute, Senator Nolin; Mr. Brandle wanted to respond.
Mr. Brandle: I wanted to mention, Senator Rivard, that I might argue that the balance between risk management and innovation is perhaps not in the right spot. If there is more investment in innovation, that is a better thing. However, I think you also need to invest in better innovation. We do not want to keep feeding the dinosaur with more money. You want to say, "Let us find another way to do it that is more effective so that, when you are programming, you are also supporting new ways to innovate while collapsing the old ways to create more revenue. That is a key piece. That is always a very difficult discussion because, if you look at the total envelope for agriculture, it is big bucks. Inside the envelope is the piece you have to talk about. We have to invest more in innovation and in better systems of innovation that are more effective. We have to lever our own assets in a different way, in order to create more impact and perhaps to decide if we are an economic development organization or what our role in society, writ large, is.
[Translation]
Senator Rivard: I would have another question, but Senator Nolin has one on the same topic.
Senator Nolin: It is on the same topic, if you will allow it, Mr. Chair.
[English]
What are the experiences of other countries facing the same dilemma, Mr. Geddes? What are they doing?
Mr. Geddes: It is hard for me to answer what other countries are actually doing to get innovation into the marketplace. However, we do know that European countries have not invited private investment into biotechnology or into genetic modification of crops in a big way, but they are putting a lot of money into research on cropping, crop systems and crop varieties to replace the need to use GM. They are investing significant dollars in maintaining competitiveness.
We know the Australian government is putting in a lot of money, on top of the money that farmers are putting in, to keep them competitive in the international marketplace. They had a bit of a blip in terms of their wheat quality, but other crops coming out of Australia are well funded in terms of plant breeding research.
In terms of innovation, I honestly cannot answer the question because I do not see them innovating a lot with some of their crop products, in terms of what they are putting in. In Canada, in terms of using soybeans to build all kinds of industrial products, we are doing some good work. You may want to invite the folks from Soy 20/20 to come as witnesses to talk about what they have done. They are so close to market with so many products, yet we have not seen the breakthroughs. What is causing that? They would be in a much better position to answer that than I would.
[Translation]
Senator Rivard: My second question is very brief and it concerns your researchers. Do you have trouble recruiting them, and especially, keeping them? The retention rate is 75 or 80 per cent. When you lose them, is it generally because they retire, or because they leave for private enterprise or other levels of government?
[English]
Mr. Brandle: In our particular case, we are a new organization in an old place. The research station was there for more than the last 100 years, but it had gone into decline. There were almost no scientists left. We were starting from the beginning in recruiting, and we have hired about 70 people in the last two years. We have not had trouble finding scientists. In fact, it is a buyer's market at the moment because of the economic situation in the U.S. Research is a luxury, and often that is a place where there are cuts. We have recruited very good people from across the border. We have a lot of brain gain. We have Americans coming to Canada to join our organization. We have Canadians coming back to Canada to join our organization. If you looked across our diverse group of people, you would see we are doing very well.
Retention, so far, is not a problem, as there is enthusiasm for a new way of doing things and for being part of a new organization. I would say the environment right now is quite positive.
Mr. Geddes: CIGI is different than most research institutes. We are not heavily oriented toward basic research. We have PhDs on our staff who do research, but our biggest challenge is finding people with experience in the international marketplace. Right now, we are looking for a new baker who has a baking technology background and a science background in proteins and chemistry in cereal crops and other crops, but they also need to know what is going on in Latin America and China. The challenge is building experience in our researchers so that they can collaborate properly with other institutes. We do not have any difficulty attracting grad students to come and work with our researchers. That has not been a problem for us, but we are a small organization. We are not looking for hundreds; we are looking at two or three at a time.
We are also fortunate that the work that CIGI has done around the world has positioned it in a fairly respectful manner in terms of the practical research we do. Collaboration with research institutes in China, Malaysia and Latin America is relatively easy for us. If we need brain power, some of these other research institutes are often happy to collaborate with us on output, trades, or practical research that we are doing.
Senator Buth: It is interesting to be on this side of the table, rather than your side of the table, for this meeting.
First, I should clarify to the committee that Baldur Stefansson and Keith Downey developed canola in Canada, just in case people did not know. Now, I have to politely disagree with Senator Ogilvie in terms of the agriculture industry being conservative and, perhaps, reluctant to adopt innovation. It is a bit of a generalization. When you look at different commodities and different geographic areas, you see a tremendous adoption of innovation.
My experience is in the canola industry but it is also mirrored in the pulse industry, where you see growers actively adopting innovation. On the canola side, of course, it has been through biotechnology, but it also flows through to the processors, the exporters and those parts of the industry working very closely with the end-use customers.
With wheat and barley growers, there is now a tremendous opportunity for the cereal industry to have the opportunity to move forward in terms of innovation and I think that is where CIGI will play an important role.
My first question is in regard to your funding mechanism. What is the split between public and private dollars in terms of how you fund your organizations? That is important when looking at public/private partnerships, especially perhaps in the move to research stations being switched and changed or blown up, which I hope we actually do not do in this country. What is the split?
My second question is: Do you have experience in the science cluster program, which is a program that was really based on industry priorities and being industry-driven, as well as the DIAP program, Developing Innovative Agri- Products?
Mr. Brandle: I can speak to our funding split. For example, this fiscal year runs from March to April, the same as the federal fiscal year. We had somewhere around 12 or 13 per cent of our funding in private dollars. Underneath that there is a range of other program funding available to research organizations, and some of it, for example, comes from the cluster program, some of it comes from cost shared, innovation or science pillar Growing Forward. Some of it comes from one-time granting from the provincial government. What we have that many places do not have is a growing revenue stream that is from our own intellectual property development, technology development and product development with partners. We try to build in a piece for ourselves in order to create a sustainable model in the end that has a number of different revenue streams. Over the next five years, you will see that one grow along with the industry funding.
I might say, Senator Buth, that I agree with Senator Ogilvie. It is very difficult to get significant dollars. There is no tradition of that. The tradition is leverage. The expectation is that I should take your $1,000 and turn it into $1 million. You would know from your former life how that works but it does work. That is the model that still applies, and I think industry is currently getting a tremendous deal, but I would argue they need to contribute more and we need to work on that.
Our number needs to grow well beyond what that is, and it is just as hard to get those dollars as any others. Especially when you are not looking for $10,000, you want $3 million. That takes a lot of work and effort. There is a piece in the tradition in the ag industry that we have to get past, whether it is producer groups, companies, individuals or large organizations.
There was a second question, but I forgot what it was.
Senator Buth: Your experience with science clusters.
Mr. Brandle: Yes. We operate as part of the science clusters programs, the ornamentals, the horticulture, flora culture and nurseries together. Our experience has been very good. I might argue that an organization like ours is positioned in a difficult way in that program because in some ways we also compete with our stakeholders for the same funding. That is a bit of a problem. If you are to create new innovation organizations, especially not-for-profit organizations that are objective like Switzerland, that are not producer organizes or companies, there may be a need for a part of that cluster program to support those organizations in a different way so we are not competing with you for the same research money. I would say it has been a very good program.
You know there are the usual growing pains and the usual layer of bureaucracy and accountability that causes a certain amount of operational headaches. Overall, it has been very good. It has really brought people together, particularly this industry. It has caused them to think about what they need to do together and what are those pre- competitive issues to work on in order to advance the sector.
The next step for them is we are building an innovation strategy for them. Now you start to hum along with the program, the next round of clusters, because there is a direction and a capability built that will help to attract research into the sector. Overall, I can just say good stuff about it.
Mr. Geddes: Senator Buth, it is a pleasure to be on this side of the table with you and with you on that side of the table.
CIGI's funding is general about 50/50 — 50 per cent from the public side and 50 per cent from the industry side. Historically it has been like that with the Canadian Wheat Board putting in farmers' dollars, as well as grain farmers of Ontario, the pulse growers of Saskatchewan, Manitoba and Alberta. We did project work with the Canola Council for a number of years. Those are good examples of industry and government in a partnership in terms of funding.
Going forward, post Bill C-18, as you will possibly recall from the hearings on Bill C-18, there is a funding mechanism inside of that bill that will ensure CIGI's ongoing funding, whether it is at 25 cents per tonne or wherever it ends up in the regulation, I am not sure. That funding will continue, hopefully, to be matched with government funding. We see with most institutes like CIGI, whether it is a food development centre in Saint-Hyacinthe or Leduc, Alberta, those are supported with provincial dollars.
CIGI is one of the few institutes that develops products and helps things come to market that the federal government funds in this same way as a non-profit. We expect that relationship to remain roughly the same with one exception, that this current strategic plan is taking us to somewhat more of a commercial side of CIGI as well. We have five commercial customers around the world that we are signing agreements with now. As I mentioned, we are going to China on the weekend to start that process with one company, as well as a couple of life science and grain companies that are very commercially focused. Everything we do with them is covered under a confidentiality agreement and they pay for it 100 per cent, overhead and everything. There are no public dollars going into that side.
Those are not hugely lucrative agreements we are signing for CIGI; that is about knowledge. What we have more than any other institute in the world is a current knowledge of how field crops are used, especially for food around the world, less so for fuel and fibre. Certainly for food, those agreements will help sustain that knowledge for CIGI as we go forward without a marketing partner as such.
On the DIAPs, it is important to clearly define what CIGI does. CIGI is largely a service group to the DIAP organization. There is a wheat DIAP, there is a pulse one, a special crops one, and others. We will be involved in the projects that those DIAPs are funding. We can do certain things to support those research projects that we are designed and equipped to do. We were not an organization that is responsible for creating the forward mandate or strategy for the canola DIAP. That would not be our job. If the canola DIAP wanted to do a feed trial somewhere and CIGI could help, then CIGI would be engaged on that side.
That is a very effective approach given where we have been in agriculture research. The one thing we are suggesting in Growing Forward 2 that ends up in those DIAPs is a more defined need for performance so that, in fact, the research generates products that go into the market place.
[Translation]
Senator Robichaud: I do not know if I should ask my question.
[English]
We have both of you here from two different organizations. Is there any competition or is there any duplication? How often do you somehow get together to push forward a message like you are doing today? People need to hear it. Those organizations that give out subsidies for research, or monies for research, have to hear where there is a problem.
Mr. Brandle: There is duplication and there is competition, and it is sometimes hard to tell the difference, but competition is always a good thing, right? It keeps us all honest, it keeps us thinking, and it keeps us on our feet. I think that is good.
In terms of our own role as an organization to drive change, when you are trying to change things, it can be a little lonely. There are a lot of advocates for the status quo; there are not that many people speaking for the future, so there may not be a lot of us together.
I would argue that we have a very strong partnership with the University of Guelph. Their president, Alistair Summerlee, is on our board and he is very much about creating the future. I cannot speak for him, but I would argue that he would see that as part of it. Therefore, our relationship with them is a part of them trying to be part of the future of innovation in agriculture. I know they have recently announced a new innovation centre at Elora, around dairy. Similarly, they are creating a new model, creating independence, and trying to lever existing things.
We do speak together, yet at some level, we might also be competing. Our researchers might be competing with university researchers at the absolute granting level. However, organizationally, we are trying to head in the same direction.
I am sure we have all read the Drummond report, as it came out yesterday afternoon. There will be changes and restraints in Ontario, and we need to think about our investments in the future and stop paying for the past. You will find a bunch of us as voices coming together for that, but it will not be everyone, Senator Robichaud; not everyone wants to change. You can be by yourself sometimes.
Mr. Geddes: From our perspective, we are doing research and innovation at a different level than the Agriculture and Agri-Food Canada research stations and the universities are. Ours is mostly practical and applicable product development research. In that field, the competition comes between the provincial institutes. That would be the Leduc Food Processing Development Centre; if the Alberta government wants to resume a certain role in doing something, they might get funding for additional equipment. The same is true in Saint-Hyacinthe, Prince Edward Island, and for the Food Development Centre in Manitoba.
On that side of the industry, we have formed what we call FOODTECH Canada. CIGI was a large part of the inspiration for this, before I was at CIGI; it is not my creation. Regardless, CIGI played a role in pulling all of those food centres together. You have this group of provincially-funded food centres and the federally funded one, CIGI, involved in this. Our commitment and agreement to each other is that if we have a project that we cannot do but one of our other members can do, we will send the project to them and vice versa. It is working better all the time. It takes a bit of time because each of these institutes has a provincial mandate.
We have a general oversight mandate in terms of promoting field crops across Canada, so it is easier for us to share than it is in some other cases and situations. If there is competition, it is driven by the way the provincial institutes are funding on the product development side. We collaborate quite well together inside of this FOODTECH Canada group. It needs to be constantly nourished because governments change in provinces and we like to take on different roles sometimes when we do that.
I think constant diligence on our side ensures we are building the synergy, not the competitive overspending the public cannot afford to do.
Senator Ogilvie: First, I did not think that Senator Buth's comments were at odds with mine at all. Indeed, I agree with her that the western grains and the additional, relatively new crops being produced are really good examples of the evolution of an industry. I was referring to what is currently one of the oldest industries in human civilization. In the Canadian version, it is relatively recent. We have moved beyond the traditional breeder's development of new issues — new varieties of plants — and a number of the results of that were accidental mutations that led to unexpectedly good characteristics of a new strain.
What I was referring to was what you are talking about, and that is the application — deliberate knowledge to a deliberate market potential application. It is not just about looking at the whole oil as a bottle on the shelf but how you can perhaps subdivide that into a highly-valued new niche product and then deliberately engineer a plant to give you enhanced characteristics in that kind of area.
I did not want to give my colleague Senator Robichaud too much comfort from Senator Buth's comment here, because I agree with what she said and felt it was simply consistent with our overall view.
I do think that the impetus for change is coming from new people entering the industry who are prepared to risk capital. The traditional participant in the industry has been very reluctant to risk capital, even if there was an identified product with a crop, such as a highly-valued apple and the need to spend money on research to deal with the unique problem that existed there. The producers were very reluctant to risk capital and move forward.
New breeds of entrepreneurs are entering the industry, and that is why, even though I agree completely, Mr. Geddes, with your caution with regard to where you are, that these will be the people who will drive the area because they are not afraid to take risk. That is something that will be very important to the new phases of the industry as you move forward.
Again, I want to thank you for your comments today.
Mr. Geddes: Can I add one other piece, Senator Robichaud — sorry, Senator Ogilvie. I apologize. I was thinking of the other side here.
It is more than being prepared to take a risk that drives innovation — sometimes it is a need. The example that I used where we took a waste product, which was mustard oil, essentially — when you are grinding the mustard to make mustard paste, flour is what you use, the oil being a by-product sitting in barrels in Saskatchewan doing nothing — you have a German company that has a greasy mechanical process that they need to clean up. With the knowledge we have about the multi-faceted properties of canola, you combine it with this, they were prepared on a whim say, "If you can design this for us, we will pay for the cost of getting this new concept into the marketplace."
It is money and the need quite often that will drive innovation. That need gets satisfied quickly and then there is no need for the rest of the work.
My comments around moving innovation into the marketplace as quickly as we can are based on that urgency, quite often, because the market is constantly changing in food, in fuels, in fibres. It is constantly changing and if you would slow it down to ensure you are funding your research out of the potential benefits of that, you run the risk of wasting the value of the research.
Again, I know that most of the people I work with want to protect the work that I am doing with them, so we have to understand the value of that. When we are using public dollars to do public research, we should be sure that the maximum use of that science, that new idea, that innovation, is realized.
Senator Buth: I am curious in terms of how you set priorities, in both of your organizations, looking at your priority setting process.
Mr. Brandle: For us there are two parts on to it. One is the unstructured, everyday, ongoing conversation with the membership, your client base, your stakeholders. Whether that is at board meetings with grocery people and growers or whether it is just the everyday interactions you have with your collaborators on the science level or at the farm level. Then there is the structured process where on a yearly basis we sit down and talk about what needs to be done, and we try to do it again in a value-chain based way.
If I think about what we did with the flora-culture industry this year for Flowers Canada, you had the flower growers, you had the flower retail and the grocery retail all together in the room talking about what the future needs to look like, what we need to overcome, where we want to be in 10 years and that sort of thing. That is the process.
Out of that comes, as you know, what is usually a long list. If you have 100 priorities, you do not have priorities. It can be quite a large list. Our organization does something called "opportunity analysis." We are here to grow horticulture. We want to make it bigger and better, more efficient and profitable. What will really make that difference? There you get a smaller list, and then out of that you go, well, what is our capability? Is there someone across the country that can help us? Can we put the partners together? Can the business development people bring in Longo and produce distribution people to make it happen or whoever your partners need to be? That is the second piece. Then you put the project together and build the delivery model. There are a number of ways to pipe the technology into the value chain. That is where your business model innovation comes in, at that point. That is how the pipeline looks.
Mr. Geddes: At CIGI, it is again different from that because we function at a different level, Senator Buth.
Until April 1, much of our prioritization was done by our larger partner which was the Canadian Wheat Board. We were doing these things in these markets. We want to be able to do this kind of market development. We see a need for this product. The Canadian Wheat Board said to CIGI to find another use for durum, for heaven's sake, because selling it for chicken feed is not the best return to growers. They would prioritize that.
We now have programming out from April through July, and that programming prioritization is set by two processes. The first is, we form two CIGI program advisory committees, one with seven farmers on it. We have seven farmers from across Western Canada. The total acreage of those seven farmers is over it 100,000 acres; it is closer to 120,000 acres. Then we have five members of the grain industry, the new marketers on another advisory committee. These are the kinds of things we think we should do given our customer contact around the world. Does that meet what you think you would like us to be involved in? We now have two program advisory committees.
My board of directors is still intact and they provide strategic direction. That will likely change for us over the course of the development of a cereals council or some model that may be similar to the Canola Council for the cereal industry. We are not fully involved in that because we have been told that the industry should do that, not CIGI. We are trying to stay out of that discussion.
We have program advisory committees that will prioritize, yes, this program ahead of this program, for us. The research we do is driven almost entirely by our customers coming to us saying, we want to develop a hand cleaner out of just mustard oil, not canola oil. They would set that prioritization for us.
The thing that gets in the way of all of this is urgency. If we have a customer in, as we just recently had, in Malaysia that was generating steam buns that would come out with a yellowish tone to them, and they need to resolve that problem or else they would dump their Canadian wheat somewhere else, we will do that. That is urgent. We will do that regularly.
We have two cargoes right now that have just gone to Europe. We are not sure what the problem is, but we will solve that ahead of everything else we do because the reputation of Canadian products is at stake. We are driven often by urgency.
The Chair: Before we close, you have touched, witnesses, on the whole value chain. I know that is very important in the process of delivering the product to market.
We see across Canada, North America and the whole world, as a matter of fact, big distributors like Costco, Walmart, Canadian Tire, Zellers, Jean Coutu and Shoppers Drug Mart with massive space for food product.
Do you have any comments? I know since you have raised the pipe issue from the beginning of the pipe to the end of pipe to the market for the consumers. Do you have any comments on how those new players in the food industry are changing the landscape? If so, what would you recommend to us in order to enhance and protect producers?
Mr. Brandle: By way of example, they are just another customer, but they are different. They are bigger; they are buying in larger volumes; they are doing all sorts of things that perhaps are different from the past.
The example that comes to mind for us is flowers. Whether you know or you do not know, most bedding plants in the spring are no longer really sold in mom and pop garden centres; they are sold in those stores you mentioned. When those flowers show up in that store, rather than the whole load being sold and the farmer gets paid when the truck arrives, he is now paid when it "swipes out." The problem is that there is no one in the store to look after the flowers.
Although we did not do a complex consumer study, we assume that a dead flower will not sell and there was a need to resolve that. The product needs to last up to two weeks in the store, often without water; otherwise, the farmer will absorb the shrink. We have a project, and this is new innovation.
Retail performance 20 years ago was not a criterion in flower breeding. You did not have to worry about how long it would last without water. Again, with the huge layer of technology over top of it, genomics technology, to try to deliver this, we are working to create flowers that will survive in that environment.
This is another point for innovation. When you understand how they work, you realize we have to do things differently. Here is an innovation that is good for the store because the flowers will look better; they will sell more. The farmer has less loss. The home garden at home requires less water. That would be the kind of thing you do to respond to it. You just accept it. We cannot change it so we go, oh, well, we are innovators, let us just fix it.
The Chair: In order to protect my Canadian producer or farmer from massive new marketing within the Costcos or Walmarts, what would you suggest to us?
Mr. Brandle: Actually, I went to the annual general meeting banquet of the Ontario Fruit and Vegetable Association and I sat with a couple of vegetable farmers, and they like Walmart. Sure, they are a great customer. They get paid. They are good to do business with. They were quite impressed. We make that assumption, of course, but it myself not necessarily be true.
I do not know if we need to be protected from those retailers. We may have to do business in a different way so that we can, because you do not need this much, you need this much, and it needs to be extremely good and at the right price. There you have innovation, new product, new low price, and you are in.
That is the kind of thing we have to do to protect our farmers — if they need protection, I am not so sure — and to give them the ammunition they need to do business with those big guys, and I think we can.
Mr. Geddes: I would start in the value chain or the food system, or whatever we want to call it. We always start with the consumer and I mentioned that earlier. We need to know what the consumers around the world want. That is exactly where Walmart or Costco will start: What can they sell the most of with the least amount of cost in terms of producing? They are about making money and there is nothing wrong with that. Should we protect farmers from that? I do not think so.
However, we have an obligation to make farmers understand where their profit centre is in that system. What we have seen these big corporate giants do in some places is dictate what everyone eats in a certain part of the world. They have asked for a much more consistent product. The wheat, flowers or pork that is going in must be like this all the time. If we can relate that back to growers and they can deliver, they can make money doing that. They have asked for a much safer product because major companies have a lot of product on the shelf all the time. They cannot afford to have a recall.
They are asking for more safe products all the time, and they have systems in place to do the tracking for that. They are asking for sustainability in their food products, which is good for the world. If you cannot continue to produce this food for me in a sustainable manner, we will find a source that can. You are pushing production around the world by doing this, to where it should be produced sustainably. That may have some profit implications for Canadian farmers and others. They cause the shifts. Whether you want this to happen or not depends on who you are. Galen Weston spoke last week at a food conference in Toronto and said pulses are the new crop. Kudos to Gord Bacon, Pulse Canada and others who have worked to move that thought forward. If you are on the right side of those companies, and you can help influence where they are going as growers, you can cause the evolution you are looking for in terms of what we are best at producing in Western Canada.
Bangladesh is not the richest country in the world; it may be one of the poorest. They have changed their flour milling process and now require consistency. They have big mills delivering flour to bakeries that produce the same kind of bread every day. Instead of buying wheat from wherever, they like a consistent product. Right now they are buying it from Canada. Understanding what that value chain pull is from these big entities does not necessarily mean we make less money. It means we do our business the way the consumer wants us to do the business, because the end of the value chain is also the consumer.
The Chair: Mr. Geddes, you have used the word, but I want to say it for the purpose of the committee: Is it fair to say that they do contribute to agricultural sustainability?
Mr. Geddes: Groups like General Mills, Cargill, and Nestlé are saying if you need to provide these products to us, you need to show that where it is being produced is sustainable and that you will be able to do that for the next hundred years. That demand for sustainability is saying to production systems around the world, "I guess we shipped our flour production here instead of here. It is more sustainable here than it is here." I think that is positive for all of us. Does it have impact on some Canadian growers? Yes, because in some cases it is not the right place to be producing this.
Senator Robichaud: With research innovation, you are looking at food production or products that go into the food chain, but now there is a lot of research for other uses of the same products. What is happening there? Is one taking resources away from the food sector or is it complementary?
Mr. Geddes: That is a great question. If you look at the amount of starch being produced that is going into bioethanol, you might argue that is taking it away from food availability around the world. Our experience would be that this is not the case. There is generally lots of food in the world. Getting it to people is the problem. I would not suggest it is a negative. If I look at two of the examples I raised, one was the German company looking for a degreaser that is biodegradable, organic, and does not have any petroleum products in it. What you are doing is using waste products that come out of another part of a process to develop an industrial product. Wherever we can, we should do that because otherwise that waste product is, in fact, a waste product. There is a lot of research going on there. Can there be too much in that area? I do not think so. We look at food barley products in collaboration with Innovation Norway. One of the problems with food barley is what you do with the outside of the seed. Figuring out ways to make sure it goes back into an animal feed or pet food in the most productive way for growers to give more value to the product.
We are looking at surplus production or by-products from processed food products that can go into industrial or fuel or fibre. We should be doing that all the time.
Senator Robichaud: I am not looking at by-products because you have to find useful ways to somehow dispose of them, and get some return. However, it has been said that because a lot of corn was being diverted to ethanol processing plants, that the price of corn has increased.
Mr. Geddes: That is absolutely true and thank goodness. Otherwise we would not be producing a lot of grain at the prices we were at five or six or seven years ago in Western Canada. It is not because the price of corn is so high that people are going hungry. As you raise the price of food products or commercially grown farm products, that allows those countries that are dependent on imports from North America or other parts of the world to build their own agricultural systems because they can afford to do that. It is not as simple as saying the corn that went into ethanol should have gone into a cow, pig, chicken or someone's tortilla. How do you make sure the global food balance is right? How does sub- Saharan Africa feed itself? It is not with U.S. corn. Part of the conversation is that we need to be sure we do not lose as we have this discussion about what should farmers be able to do with what they produce. If they want to sell it to make ethanol and that makes them the most money, I am on their side to do that. If we want to do development in sub-Saharan Africa where the population growth is some of the most rapid in the world, do we do it by feeding them from North America? I do not think so. We do it by creating global agricultural structures that allow the prices to be such that a farmer in sub-Saharan Africa can be rewarded for growing his own food.
Senator Robichaud: We could have a long discussion on that. It was brought to my attention that the local farmers over there could not live with what they produce because there was importation of subsidized —
Mr. Geddes: Grain from North America is coming in there and driving down the price of their commodities.
Senator Robichaud: They were all shutting down. However, that is for another day.
The Chair: Thank you for sharing your visions, thoughts and some recommendations to the committee. On this, honourable senators, I declare the meeting adjourned.
(The committee adjourned.)