Agriculture Committee on Feb. 9th, 2011

[Dr. John Kelly]

It comes when somebody has proof of concept. They know it works, but they cannot get to the manufacturing phase. Typically you have university and government funding to get to that proof-of-concept stage, and then you have to try to attract some funding from the private capital market, the angel markets, or the venture markets.

In agriculture, we have a real dearth of financiers. We have people who will take companies, if they have $2 million in sales, and will help grow them. But we don't typically have any investors for that valley of death.

One thing the government could do would be to set up a matching grant fund to support these types of things, to de-risk some of the technologies that are out there.

A lot of the technologies don't have the interest of the venture players, because the venture players are looking for the home runs. A lot of the technology in agriculture will be profitable, but they're not home runs. That's another part of what we do.

Will's company grew with support through the university and the SBIR program, which is something we should think about embracing.

[Randy Hoback, Conservative, Prince Albert, SK]

When we look at the infrastructure for the biotech sector, one of the comments we heard in Saskatoon was that we can develop the information, we can develop the product, but for some reason we always export the manufacturing.

Any ideas on how we can curve that so that the manufacturing is also happening here, so that we can see a complete system here in Canada instead of manufacturing being exported off to the U.S. or somewhere else?

[Dr. John Kelly]

Part of it is money and having the ability to finance from that valley of death on. I know that Agriculture and Agri-food Canada tried to get some Canadian people to take a chance on this. They weren't successful. I don't know the reasons for the lack of success in finding investors, but they were able to find those investors easier in the U.S.

Part of what we need to do is to make it easier, and there has to be some incentive for investors to look at these early-stage technologies.

The other part is that we need to educate the capital sector on what the opportunities are. They know the farmer model and they know the IT model. Most Ontario people I talk to, when I ask them what the largest sector in Ontario is, will say it's auto, IT, or pharma. I have to tell them they're wrong—it's agriculture first, then those other three. Most people don't know that.

[Randy Hoback, Conservative, Prince Albert, SK]

With respect to infrastructure for the biotech sector, it's nice that this conversation didn't go to GMO. When we do this study, it automatically goes straight to GMO. Bioscience is a lot more than just GMO.

What do we need to do to build the infrastructure necessary to make Canada the major player in biosciences and biotechnology?

We talked about what's happening in China and Australia, the investment that's going on there. Should we be looking at doing more producer checks? Should we be looking at other ideas like that?

[Dr. Steven Rothstein]

I'll just talk about my area, because it's a very broad question. In my area, the key thing that people need to be able to understand is how different genetics, whether it's GMO or base genetics, have an effect on what the plant looks like, the traits the plant has. That's the thing that's really difficult to do, and companies are definitely looking for opportunities not to have to do as much of that as they are.

For example, if we were really good at that and we set up a significant organization to do it, then all of a sudden all the things that come from that would come to you. For example, I work on agronomic traits, basically yield and the effect of different stresses on yield. But it wouldn't just be that. It could be how to use crops for other types of traits, or how to use them for producing fuel. You need to have a system in place where you're really good at that core, a system that allows people to come in with whatever ideas they have, whether they're from the public sector or the private sector.

I think there's an opportunity there. No one in the world is doing that at the level it needs to be done to get company research organizations interested in contracting that out. That's just one example.

[William J. Rowe]

I was born and raised in Kitchener-Waterloo. I'm a University of Waterloo graduate. I remember when Phillip Street was farmers' fields. Within a span of five to 10 years, the University of Waterloo just made a stand and declared themselves the MIT of Canada. From that, RIM, Sybase, Open Text, MKS, and Virtek--I could list a bunch of others--just blossomed. A lot of money went into that, and now you see the return on investment coming full circle.

From that standpoint, I think if you're going to do this properly, and along the lines of what these gentlemen are saying as well, we--the collective “we” of industry, academia, and government at all levels--have to declare ourselves and pick the geography. We have to say that we're going to put big money into this sector and that this is the commercialization pathway, soup to nuts, to get from idea to a product on the shelf. We need to have all the stakeholders involved and have a process that meets certain minimum criteria to achieve it. Then you start getting a cluster that's spitting out commercial opportunities.

In a previous life, I worked at the University of Guelph in the area of selling, if you will, R and D contracts for science and engineering at Guelph to the private sector. What I often found was that faculty in science and engineering often didn't know they had a product when they most definitely had one. The way they're wired, typically--not all the time, of course--is to chase the same thing over and over, the same concepts over and over, and publish, publish, publish.

But while they're doing that, in that activity of sort of chasing their tail in their quest for knowledge, they're spinning off all these concepts, ideas, and products, and they often don't realize that it's okay to go out with this product or that product, that this is worth commercialization. You can always have a next generation or a version B or a new and improved product three or four years from now when you answer the next question in your mind's way of thinking.

A lot of times we have excellent technology or seedlings of excellent potential product sitting on university shelves across the country. That isn't seeing the light of day. It's not getting into a commercialization pipeline that takes somebody through. In fairness, a lot of faculty in the science and engineering area are either not wired that way or not motivated or incentivized that way. They don't get past and they don't understand the commercialization piece. They do need help. A lot of them will admit that fully; it's not something they're bashful about. They know they need help and oftentimes they simply don't know where to turn.

If that were more obvious and there were perhaps commercialization centres that were better structured and better funded...I'm more for gathering your strength in two or three things than kind of half funding everything all over the place, because I think that's the stronger approach to tangible outcomes.

[The Chair, Conservative, Larry Miller]

Thank you.

There may be time at the end, Randy, if you have something else.

Mr. Easter, five minutes.

[Wayne Easter, Liberal, Malpeque, PE]

Thanks, folks.

I'm going to go from the broad areas to some of the smaller areas that maybe we need to make some recommendations on.

John, you mentioned developing risk management programs for energy crops. We have some problems with current risk management programs in agriculture specifically. Are you suggesting that there needs to be something different from what applies to agriculture generally for energy crops?

[Dr. John Kelly]

No. It's for crops that have no history of use, right?

[Wayne Easter, Liberal, Malpeque, PE]

Okay.

[Dr. John Kelly]

You can pick the energy crops. Miscanthus is not native here. How do we de-risk the timeframe required for growers to put miscanthus in?

[Wayne Easter, Liberal, Malpeque, PE]

Okay. That clarifies it. I agree with you 100%. It's something that we need to...we've seen some of that in Saskatoon.

The other area that a couple of you mentioned was the whole area of losing researchers. We have the same problem. You mentioned berry researchers. There's the same problem in B.C. We have the same problem in Atlantic Canada. As Agriculture Canada researchers retire, they are not being replaced. It's a serious issue.

One of the areas they're recommending, perhaps more so in the Saskatoon area, is that we really need to basically re-enhance our public research initiative in discovery research, because I think we're in a different time now than we used to be. My concern is that private companies are attracting the best of the best because they're paying more. The incentives are there.

It's going to be hard to get back to a system where we attract the best of the best to public research, the discovery research area. Are you folks suggesting that we need to up the ante, I guess, in terms of public research that involves the Government of Canada?

[Dr. Steven Rothstein]

If I can parse it out, there are two things you're referring to. One is the non-replacement of key researchers, and that can be in either the government sector or in university. I will refer to the university environment because that's what I know.

When I was first at Guelph, for the 10 years between 1988 and 1998, we didn't recruit anybody. Then there was a little period of time when there was some recruitment and now we're back to not recruiting. That's created an enormous problem with regard to developing innovation across the country. We're not unique in that. I don't have a solution for that because it's all coming down to finances, clearly.

As to whether it's a good thing, I would argue it's not a good thing at all.

[Wayne Easter, Liberal, Malpeque, PE]

I don't want to interrupt you, Steven, but on the problem of finance, there is no question that the data we have from Statistics Canada, the Canada Foundation for Innovation, from everywhere, shows that a dollar invested in research returns more dollars than a dollar invested anywhere else.

Larry will cut me off in a minute, but I just want to add two other questions that I think we need answers on. Maybe both of you could answer.

Steven, you mentioned the difficulty with grant applications, all those bureaucrats following you around. I think we're in a time now where we basically allow the requirements for perfection to get in the way of doing the right thing. Governments are so concerned whether they're going to end up in the press over spending $10 in the wrong place, but they'll spend $1,000 on bureaucratic delays. It makes no sense to me. I'd like you to expand on that.

What I hear from researchers in my own area is that they're spending 40% of their research time chasing money when they should be spending their valuable time doing what they were trained, educated, and have the expertise to do. That's the problem.

My second to last question is for Mr. Rowe.

You talked about the trials in design. I was thinking that as a result of not doing proper trials, or not being able to get the people, or whatever the reason is behind it, we're actually losing the original investment that was made in that research area.

Could you answer those?

[William J. Rowe]

What was the last part of your question?

[Wayne Easter, Liberal, Malpeque, PE]

You mentioned not having the number of people to do the proper trials. I see that we're losing the original development of the product, or the benefit of that becoming known in a database analysis way. In effect, we have lost a lot of the original investment that we made in that original research.

[William J. Rowe]

It really comes down to the outputs you're looking for. If you're looking to fund investigational research that is far removed from commercialization, so that it's not done in support of a health claim, then that money perhaps did have a higher return on investment.

However, if your outputs are a health claim, which is really what a lot of the food and beverage companies and even growers groups are ultimately looking for in their sector, because that's what gives them commercial advantage domestically and internationally, then these trials have not been designed in the appropriate way.

It's not that these trials are “bad trials”, but if the output is health claim substantiation as defined by Health Canada, the FDA, USDA, or the EU, then they don't meet the minimum threshold is what I'm getting at. It really comes down to the outputs.

I have one other quick comment on funding, which hasn't been discussed today. The SR and ED, the scientific research and experimental development tax credit has been in existence for decades, regardless of which party has held power in Ottawa. It's been in existence for quite some time, and it grows every year. For my company, it's been a phenomenal tool. It has a very low burden of proof compared to an NSERC or IRAP situation. I have a huge competitive advantage over, say, the University of Guelph in hiring scientific staff because of the SR and ED tax credit. That's a matter of public knowledge. There's no secret there.

With respect to the SR and ED program, the federal government has done a wonderful job for the private sector, whether you're a service provider like us, a research company, or a company with a research department like Syngenta, in setting up a program that allows you to subsidize salaries through this tax credit.

[The Chair, Conservative, Larry Miller]

Dr. Rothstein, briefly.

[Dr. Steven Rothstein]

I'll be very brief.

I agree with John on the tax credit, by the way.

On the point of bureaucracy, I do have a number of grants and contracts. Over the years I'd typically have somewhere between nine and 14 reports a year to write to satisfy different things, and I've had to hire a person to do that. I can't do that myself. It's the life we live now with auditing and everything else.

You asked about writing the grants. I look at that as my job, to get money for my group. I spend a lot of time doing it. I don't see any way around that.

[The Chair, Conservative, Larry Miller]

Mr. Shipley.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Chair, and thank you to our witnesses.

Bill, you raised something that's well known. For example, the University of Waterloo and MIT. They were going to be the champion. This is when they made that decision. Then it would seem the private sector said they were with you, and this is what they could do.

I'm sure it was much more complicated than that. Who made that decision, and how did that decision get made by an educational institution? Was that strictly on their own? They made that decision to say this is how they're going to bring in partners, this is how they're going to do the research, and this is how they're going to marry together....

I'll talk a little bit, Allan, about your comments on industry and universities.

[William J. Rowe]

Waterloo historically had a lot of strength in engineering and computer science. They helped grow those sectors, academically, technically.

You really have to go back to Dr. Hagey, one of the original people involved. As they grouped, they made a concerted effort to declare themselves in this category; they were going to lead. At the time they were also the pioneers of the co-op model, which many universities, all universities pretty much, as well as community colleges, now follow.

I think there was a bit of good timing, a bit of luck, but there came a point when the university administration at Waterloo said they were going to draw a line in the sand. This is who they were going to be. They were going to declare themselves. They were going to align themselves along this pathway.

They've never looked back. That was probably made sometime in the late 1960s, early 1970s. I think President Burt Matthews at Waterloo at the time was also a key driver of that, as well as all the subsequent presidents. The most recent president, David Johnston, was part of that as well.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Steven, in terms of the University of Guelph, maybe agriculture, biotechnology isn't quite as sexy as having the MIT from Waterloo.... I don't know.

In terms of being able to move ahead, is that a conscious decision? Is the University of Guelph recognized across Canada as an agriculture university? Is that something you could see to grasp, that you're on the cusp of something revolutionary? It's going....

We talked earlier with our witnesses about this being the largest industry in its value to our economy, quite honestly, not only in Ontario but in Canada.

You're going to grab this thing and become the university, not just in Ontario but in Saskatoon and wherever. This is what you're going to do. You're going to be the champions.

Is that something you would ever see being viable? I'm listening to Allan talk about industry and university: one wants the commercialization and the other is about programming. It's disjointed.

I'd like comments from both of you on that. I believe somebody has to champion this, and then how do we fit in as a government?

[Dr. Steven Rothstein]

You're putting me on the spot with that one. The question is, should or could the university declare they're going to be the champion?

I think it goes to what Bill was saying before; it is a decision that you can make. You can put your resources there. You can put your intellectual efforts there.

Unfortunately, and this is just the way it goes, it has drifted over the last period of time, partly because there aren't as many students going into agriculture any more and that drives some of the equation. The funding models don't work exactly the same as they used to.

If you're asking me whether it should be done, I absolutely think it should. I think it should be done here. I think it could be done as well in Saskatoon. There may be other universities where it should be done.

I think it takes leadership and funds. I don't know what else to say about that.

[Dr. Allan Paulson]

I agree that it definitely should be done. Enrolment in faculties of agriculture is declining across the country, but I think it is because potential students don't see it as being sexy. They see it as farming when in fact the agrifood industry now is a long way from farming.

Somehow, if food, agriculture, agrifood were on the national research priority list, I think that would attract more researchers, more funding, and more businesses to the sector.