An Economic Analysis of GRDC's Investment in Barley Breeding

from breeding cycles of the order of a decade the analysis is clearly morereflective of returns from the previous structure.The analysis has not considered benefits in relation to investments at the projectlevel. However benefits were aggregated by GRDC region and they are veryuniform in terms of the likely percentage increase in production. The Northernand Western regions each had about one quarter of their increase from varietiesbred in other regions. The corresponding figure for the Southern region was twoper cent. This pattern is likely to simply reflect the relative size and location ofthe Southern region. It also reflects some level of integration at the nationallevel.As a result of the early releases and their rapid adoption, and of the assumedyield increases, the investment can be expected to break even by 2009. Therecan be some degree of confidence in this conclusion as it is based on the actualpattern of deliveries. There is less certainty on the yield assumptions as these inmost cases are simply based on increases recorded in NVT trials. The evaluationwas not able to locate any strong evidence on the transferability of NVT increasesto the field situation. The confidence in the evaluation would be considerablyincreased if that were available (as clearly would be the utility of the NVTsystem). Note the issue raised is not the well accepted and well understoodreliability of NVT in terms of ranking.Given that the investment is already close to profitable under the assumptionsused and is based on actual data, sensitivity analyses were more relevant toassumptions on medium term benefits. If benefits in the medium term declinesubstantially, the investment still remains highly profitable. The decline couldresult for example if there was a reduced rate of replacement varieties in futureand profitability declined, for example from impacts of climate change. Based onnational yield and production trends, barley appears to be increasinglycompetitive with wheat. The analysis assumed that position would be maintainedparticularly as barley is considered a highly adapted crop generally andparticularly as climate change impacts increase.The investment was evaluated against a problematic base of what might haveeventuated if GRDC had not invested. The assumption was made that otherbreeding arrangements would evolve but there would be a lag and net benefitswould be only one half of currently achieved benefits. The analysis was not verysensitive to more pessimistic assumptions indicating that the rapid early adoptionof new varieties was dominating the analysis. The pessimistic assumptionsincluded the possibility that recently released varieties might not be accredited asmalting varieties. However the varieties were still assumed to be widely adoptedas feed varieties.The length of the lag until other breeding arrangements evolve will depend onhow quickly EPR grow to make commercial arrangements more likely. Thiseconomic analysis has not quantified EPR because they are a transfer payment,that is a cost to the farmer and a benefit to the breeding agency. Futureinvestment decisions will need to take greater account of EPR revenue than wasthe case in 2002. When the projects at the start of this period of evaluation werefunded in 2002 a higher proportion of the crop was not covered by EPR.Another conservative aspect of the analysis is the exclusion of quality aspectsthat may contribute to a price premium. But to some extent the adoptionestimates should reflect all advantages, not only in yield.- 27 -