WASHINGTON, Jan. 5 – A new report from USDA’s Economic Research Service (ERS) documents how private sector companies are increasingly dominating the development of new innovations for food and agriculture in many parts of the globe. The United States leads the way with about one-third of the global private investments in research and development.

“This high level of investments partly reflects the large U.S. domestic market for agricultural inputs, a strong and complementary public agricultural R&D system, and a relatively favorable regulatory environment for the commercialization of genetically modified (GM) crops,” notes the report.

In constant 2006 U.S. dollars, total food and agricultural R&D expenditures in the private sector increased from $14.59 billion in 1994 to $19.18 billion in 2007, or at an average annual rate of 2.1 percent. R&D expenditures in food manufacturing rose faster than those in agricultural input industries, and by 2007, food manufacturing accounted for about 58 percent of the overall annual total.

Across sectors, the most rapid growth in worldwide agricultural R&D over 1994-2010 was for crop seed and biotechnology, where annual R&D spending increased from about $1.5 billion in the mid-1990s to nearly $3.5 billion in 2010 (constant 2006 U.S. dollars). Real R&D spending declined for crop protection chemicals and animal nutrition.

Click here to view a table of agricultural research and development (R & D) spending by major multinational corporations and public institutions in 2007.

According to the researchers, comparative statistics for government spending on agricultural research are only available for 2000 and they estimate that total global public-sector agricultural research in 2000 was $16.3 billion in U.S. dollars and $20.8 billion in purchasing-power-parity (PPP) dollars. The private sector appears to account for between 39 and 45 percent of the total global investment in food and agricultural R&D worldwide, depending on whether comparisons are made using market or PPP exchange rates, and about half of the total in high income countries.

In the U.S., private spending on food and agricultural R&D has exceeded public-sector agricultural research expenditures most years since the late 1970s.

Other key findings include the following (figures below are in current or nominal dollars, unadjusted for inflation):

• In 2010, global private-sector investments in R&D related to agricultural inputs reached $11.03 billion, an increase from $5.58 billion in 1994.

• In 2007, global private-sector investments in R&D related to food manufacturing reached $11.48 billion, an increase from $6.02 billion in 1994.

• In 2009, global private-sector investments in R&D related to biofuel reached $1.47 billion, with most growth in this area occurring since 2000.

• Generally, the largest four to eight firms in each sector accounted for about three-fourths of the R&D in that sector, with larger firms spending more than smaller firms on R&D as a percentage of product sales (with the exception of small biotechnology firms). Typically, the large firms are multinational operations with global R&D and marketing networks.

• In most of the agricultural input industries, market concentration increased during 1994-2009, with the highest lev¬els observed in the animal breeding and crop seed sectors and the largest increase observed in the crop seed sector.

• Rising levels of market concentration were not associated with larger R&D investment in agricultural input sectors.

• The globalization of food and agricultural R&D may accelerate the rate of international   technology transfer, reduc¬ing productivity differences across nations and regions.

“Growth in the productivity of the global food and agricultural system will be largely determined by today’s investments in research and development (R&D),” states the report. “In recent decades, the private sector has become a major player in developing innovations for food and agriculture.”

According to the report, factors spurring private companies to invest in food and agricultural research include the emergence of biotechnology and other new scientific developments, the strengthening of intellectual property rights (IPR) over agricultural innovations, new regulatory requirements, the expansion of markets for improved agricultural inputs and food products, and rising consumer demand for more diverse foods. More recently, rapid growth in the market for biofuel has pushed companies to expand their R&D investments in this area as well.

The report examines changes in the organization and structure of agricultural input industries (crop seed and biotechnology, crop protection chemicals, synthetic fertilizers, farm machinery, animal breeding and genetics, animal health, and animal nutrition) and whether increases in market concentration in these industries are associated with increases or decreases in the level and intensity of R&D investments.

For a detailed examination of the interaction between public and private sectors in agricultural R&D in the United States, the researchers suggest “Public-Private Collaboration in Agricultural Research: New Institutional Arrangements and Economic Implications” by Fuglie and Schimmelpfennig (2000).

The following is the link to the ERS report cited in this article: http://www.ers.usda.gov/Publications/EIB90/EIB90.pdf



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