Biological innovation in South African Agriculture : economics of wheat varietal change 1950-2012

Abstract

In the wake of increasing private investment in crop breeding research and the release of new varieties by global biotech companies such as Monsanto, there is rightfully a question related to the benefits from wheat varietal improvement research funded by the public sector. It is therefore critical to understand the economic benefits generated from public investments in wheat varietal innovations. Since private and public institutions and funding sources are sometime jointly involved in developing and commercialising new varieties, a related problem is how to estimate benefits from wheat varietal innovations and apportion credit to the different institutions, both public and private, which contributed to the research that developed new wheat varieties across different time frames. Addressing this problem helps generate important information for decision makers that includes: ideas to inform further support for more research and balancing local varietal improvement support (including mix of research support across different crops) and getting technologies developed from other contexts such as international sources. The main research problem addressed in this study was the estimation of benefits from wheat varietal improvement research and their attribution to the Agricultural Research Council-Small Grains Institute and various sources of wheat research investments that contributed to varietal changes in South Africa. The findings contribute to generating information that is important in guiding decision-making on wheat varietal improvement investments, including national policy planning, to support wheat varietal innovations in South Africa. The empirical analyses used data on market shares of wheat varieties planted by farmers (used a measure of adoption rate of the varieties) and estimates of proportional yield gains, annual wheat farmer prices in South Africa and annual quantity of wheat produced across different wheat production areas in South Africa, namely dryland summer areas, dryland winter areas, and irrigation areas. A vintage regression model was applied to estimate the proportional yield gain from wheat varietal improvement in South Africa. The results indicated that the rate of yield gain due to release of new wheat varieties (varietal improvement) was 0.8% per year (equivalent to 19.84 kg/ha/year) for dryland summer varieties and 0.5% for both irrigation (equivalent to 32.20 kg/ha/year) and dryland winter varieties (equivalent to 16.65 kg/ha/year). The estimated aggregate economic benefits over the analysis period 1985-2015 amounted to R22.81 billion from all sources, which is an average of R0.76 billion per year. About R7.52 billion (33%) of the aggregate economic benefits from wheat variety research programmes in South Africa were from varieties developed in the pre-1985 period. The results using the geometric rule to attribute economic benefits among different institutional sources showed that local wheat research programmes have been relying on breeding efforts from CIMMYT and other sources. The results confirm that not accounting for attribution of benefits by source and time period results in an overestimation of benefits to any specific research programme. In addition, comparison of benefits between ARC-SGI and local private sector actors, mainly Sensako, before and after deregulation of the wheat sector showed that benefits to the ARC-SGI decreased after deregulation while the benefits to Sensako increased. The results highlight the impact of the drop in public funding for wheat variety improvement research after deregulation. Given the importance of wheat as a main cereal crop (second after maize) in South Africa, public funding for variety improvement remains critical for the country. An analysis of ARC-SGI partnerships and pedigree analysis of selected dominant varieties demonstrated that wheat varietal improvement research relies on efforts of other institutions and previous research. The results illustrated the need for attribution of benefits from wheat varietal improvements to avoid overestimation of benefits allocated to any institution. Further research would be be required to assess complementarity and substitution effects of the changing roles and how best public and private wheat varietal improvements in the country can be further stimulated to enhance productivity.