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The rationale for defra investment in r&d underpinning the genetic improvement of crops and animals - IF0101

Is publicly funded genetic research for animal and plant improvement an important part of the delivery of Defra’s Sustainable Farming and Food strategy? As with other forms of public spending, genetic methods for delivering these objectives need a robust economic rationale and justification. The rationale can be provided by market failure: this is economic jargon for the observation that the private sector will not always undertake research to deliver public goods. The justification for public research is that it is demonstrably economically efficient. This means that either it is the least cost means of delivering a specific public good objective, or that the net social benefits of research (i.e. benefits minus costs) of genetic delivery methods need to exceed the net benefits of a reasonable counterfactual, that is the next best means of delivering the same objective. The objective of this project is to assess how well current animal and crop genetic R&D can contribute to the delivery of Strategy goals, and to undertake cost-effectiveness and or cost-benefit analysis to determine the efficiency of genetic research relative to alternatives.

The need to compare the net benefits of competing delivery channels raises a number of issues for this project: 1) what elements of animal and crop research can contribute to which objectives of the Strategy? 2)what are the costs and benefits associated with each of the relevant elements? 3) are there counterfactuals to not funding each specific element, and is it possible to identify the associated costs and benefits of these? 4) the net benefit of Defra funded research or alternatives need to be assessed in terms of when benefits will be delivered relative to the Defra strategy dates. In other words, how does time discounting alter the calculus of meeting strategy objectives at least cost?

This project addresses these issues with a structured and sequential survey methodology, which aims to provide the basic information and data for a robust economic appraisal of the genetic research portfolio. The basic information gathering process comprises of two expert/"Delphi" meetings for separate animal and plant genetic scientists. Delphi (i.e. expert) questionnaires can be designed to provide qualitative estimates of research impacts that can provide the basis of a subsequent quantitative valuation of the benefits. The typical format of a Delphi exercise is that contributing experts are given the opportunity to comment on data and assumptions in several iterations until a consensus is reached. The first meetings will address elements 1- 3 above and define a range of issues and research questions that can then be put to a wider population of genetic researchers and stakeholders. This wider consultation exercise will be conducted using a web mail survey, which will be designed to elicit wider input to relevant questions on research prioritisation. The findings from this wider survey exercise will then be returned to the initial expert groups for further review and prioritisation. The output of the second expert panel meetings will then feed into an economic assessment to determine the costs and benefits of alternative research strands. The quantitative element to the project concerns the derivation of research costs and benefits. We assume the former to be readily available and attributable to clear categories related to Strategy goals. The economic benefits of research can be categorised as market or non-market. Market benefits effectively arise when research output and adoption change the location of final product demand and supply curves, thereby potentially giving rise to changes in resource rents (i.e. revenues minus input costs) to producers, and well being to consumers who pay less than they are willing to pay for genetically improved agricultural products. These elements of welfare change (so-called producer and consumer surplus) need to be estimated using a careful process of identifying the relevant final product and technology markets, and assessing market price and quantity effects of research adoption. Consumer surplus effects also relate to the valuation of non-market benefits, some of which will be amenable to estimation using market prices, while others will require non market methods. Overall, we estimate that the non-market benefit part of the return to genetic R&D will be estimated using benefits transfer, i.e. existing non market benefit data.

This project will be led by two economists drawing on a scientific panel of animal and plant geneticists. This panel will include researchers outside SAC and outside the Defra-funded portfolio. The panel will provide a forward-looking horizon scanning function and advise on defining research feasibility; that is, the probabilities of research success, rates of research adoption and duration of benefits to UK sustainability and their dissipation through leakage.

Our analysis will be guided by standard government appraisal procedure as set out in the Treasury Green Book. It will also draw on SAC research into the measurement of economic returns to genetic improvement
(e.g. Pryce et al 2000).

Pryce, J., G. Simm ,P. Amer, M. Coffey, A. Stott. (2000) Returns from genetic improvement in dairy cattle over
The general objective of this project is to assess how animal and plant research can be matched to Defra policy aims as set out in The Strategy for Sustainable Farming and Food. The project will evaluate the costs and benefits of proposed research, and determine whether Strategy delivery by selected genetic means offers value for money.
More specifically, it aims:

1) to identify how the relevant elements of genetic research and development in plants and animals can contribute to Defra’s strategy and wider stated objectives;
2) to identify the most cost-effective alternative or currently implemented means to achieving the same outcomes;
3) to conduct an incremental cost-effectiveness analysis comparing additional research to the best or currently implemented intervention for achieving specific outcomes, that will take into account the timescale for delivery and Defra time-bound targets;
4) to conduct a cost-benefit analysis to assess whether further investment in genetic research would be an efficient addition to existing policy instruments;
5) to analyse the wider deliverables of Defra-funded R&D to underpin genetic improvement, and identify the implications of a significant reduction in Defra’s investment in this area.
Project Documents
• Final Report : The rationale for defra investment in r&d underpinning the genetic improvement of crops and animals   (710k)
• Executive Summary : The rationale for defra investment in r&d underpinning the genetic improvement of crops and animals   (154k)
• Final Report - Annex : The rationale for defra investment in r&d underpinning the genetic improvement of crops and animals   (2878k)
Time-Scale and Cost
From: 2006

To: 2006

Cost: £99,360
Contractor / Funded Organisations
University - Scottish Agricultural College
Agricultural Waste              
Agriculture and Food Chain              
Economic Research