Strategic Research Programme 2011-2016: economic impact

7 Genetic Improvement

For many years funding from the SRP (and predecessor programmes) has been used to support research and research infrastructure that has delivered genetic improvements in crops and livestock.

Genetic improvements are permanent and cumulative. This means that gains realised in one year will continue to be realised in subsequent years as economically advantageous traits are expressed in each new generation. On-going research means that the ability to select for desirable traits is continually increasing, which causes the total cumulative impact to increase each year. In order to estimate the total impact of genetic selection in 2016 (or any other given year), it is therefore necessary to consider both the cumulative benefits associated with historic research as well as the marginal additional benefits generated by research supported by the 2011-16 programme.

This chapter considers both aspects of this impact.

7.1 Livestock

Since the early 1960s, consumption of milk per head in developing countries has almost doubled, meat consumption has more than tripled and egg consumption has increased by a factor of five. This increase has been achieved by increasing both the number and the productivity of animals reared. Improvements in livestock productivity, particularly in developed countries such as the UK, have largely been attributed to genetic selection. These productivity improvements arise because genetic selection helps to:

• bring about general productivity gains resulting from animals displaying desirable genetic traits - such as increased milk yield or carcass weight;
• reduce incidence of disease within a population of animals - thereby reducing losses to farmers from mortality and reduced productivity; and
• improve feeding efficiency by increasing the weight of meat that can be produced per kilo of feed.

While genetic selection has long been a feature of the livestock industry, traditionally this was based on visual inspection rather than scientific analysis. In recent decades traditional techniques have increasingly been replaced with more efficient statistical methods for estimating the genetic merit of animals.

In the UK the development and application of statistical genetic selection techniques within the dairy, beef and sheep industries has been driven largely through Edinburgh GENetic Evaluation Services - EGENES, which is delivered by one of the MRPs.

7.1.1 EGENES

EGENES uses performance and pedigree data recorded by farmers, breeders and other industry players to produce routine genetic evaluations for all dairy cattle and sheep in the UK and for the UKs biggest beef breeds. The evaluation outputs are then made freely available to the industry through a variety of sources including industry websites, trade publications and the popular agricultural press.

The EGENES unit is closely linked with industry and uptake of the outputs from the service within the UK livestock industry is high. This is reflected in the fact that much of the work of the unit is funded directly by industry. SRP funding has however been instrumental in enabling the Unit to leverage in this commercial funding. It is therefore appropriate to consider the impact associated with EGENES as part of this analysis.

7.1.2 Underpinning Capacity

The work undertaken by EGENES is underpinned by research that is made possible by genetic resources and research infrastructure that are managed by the MRPs.

The Langhill Herd for example is a pedigree herd of dairy cows that has been carefully selected since the 1970s - making it the world's longest running large animal experiment. It includes a group of "high genetic merit" animals and a control group that has been selected to reflect the average genetic value of dairy cattle in the UK.

The herd provides a valuable genetic resource that enables scientists to undertake controlled experiments on various aspects of animal nutrition, fertility, productivity and welfare that would not be possible on a commercial farm. The results of this research directly inform the work of EGENES.

These genetic resources and the research farms on which they are based are funded directly through the SRP, which provides further justification for considering the benefits associated with these resources as part of this analysis.

7.1.3 Benefits Realised to Date

The economic benefits of genetic selection are measured by comparing the performance of individual animals within a contemporary group with the average of other animals in that group. The UK dairy industry for example uses a measure called "Profitable Lifetime Index" ( PLI), which is a measure of the additional profit a bull with a high PLI is expected to return from each of his milking daughters over her lifetime compared to an average bull.

Using this measure it is estimated that genetic improvement in British dairy cattle over the last 20 years has been worth £2.4 billion, of which at least £408.0 million (17%) is directly attributable to EGENES. It is also estimated that genetic improvement has added around £500 million in additional value to the UK beef herd. Assuming that a similar proportion of this benefit can be attributable to EGENES suggests around £83 million benefit can be attributed to work supported by the SRP.

In both cases these impacts were measured over a 20 year period, which implies that the annual value of these benefits to the UK dairy industry is around £20 million/year while the annual value to the UK beef industry is around £4.2 million. Scotland accounts for around 9% of the UK dairy herd and 28% of the UK beef herd, which implies that these improvements are worth £1.9 million to the Scottish dairy industry each year and £1.2 million to the Scottish beef industry.

In addition to these benefits research funded by the SRP has also led to the widespread adoption of new genetic selection indexes for dairy cattle. These indexes have increased the average productive lives of dairy cattle from 3.4 years in 2004 to 4.3 years in 2009), reduced the average calving interval from 431 days in 2008 to 423 days in 2012 and improved milk yield. It is estimated that the value of these benefits to the UK dairy industry amounted to £634 million between 2008 and 2013, which equates to an annual impact of £126.8 million across the UK and £11.8 million in Scotland.

Research supported by the SRP has also enabled genetic improvements worth £17.8 million to be realised across the UK sheep breeding industry. These benefits were realised over 10 years so the annual value of this improvement was around £1.8 million across the UK. Around 20% of sheep in the UK are in Scotland so it is reasonable to assume that £0.4 million of this benefit has accrued to sheep farmers in Scotland.

Taken together these benefits were worth a total of £152.7 million to the UK livestock sector in 2016 and £15.2 million to the Scottish livestock sector.

7.2 Crops

Funding from the SRP (and predecessor programmes) has also been invaluable in supporting genetic improvement in several food crops that are important to the Scottish economy, in particular soft fruit, barley and potatoes. These improvements have been realised as a result of research findings being used to support the development of new varieties of crops that:

• produce greater or more reliable yields;
• are more resistant to disease; and/or
• exhibit characteristics such as improved taste, texture, nutritive value or appearance, which are desirable to consumers and/or food processors.

As with livestock breeding, genetic selection in crops is not new but research supported by the SRP has led to the development of new tools and techniques that have helped to make the process considerably more efficient.

In the past there was a considerable amount of trial and error involved in plant breeding because plant breeders had to breed a new variety and then wait until it reached maturity to see whether or not it would express the desired trait. The development of modern genetic selection techniques has removed much of this uncertainty and made it possible for breeders identify whether the desired trait will be present at a much earlier stage - thus making the whole process much more efficient.

7.2.1 Underpinning Capacity

The MRPs act as the custodian of three globally important collections of genetic material: the Commonwealth Potato Collection, the UK Rubus (raspberries), the Ribes (blackcurrants) Germplasm Collection and a 10,000 line barley mutant collection.

The Commonwealth Potato Collection is the UK's genebank for potatoes and contains around 1,500 samples from more than 80 different species of potato. It is one of a network of international potato genebanks and provides the basic genetic resource for the improvement and adaptation of this important food crop.

One of the MRPs is also the only organisation in the UK that is authorised to produce pathogen tested Rubus and Ribes nuclear stock to enter the UK Plant Health Certification Scheme. The Scheme operates to ensure that the soft fruit industry in Scotland (and the rest of the UK) has access to high-health plants for propagation.

Together these collections mean that researchers in Scotland (and elsewhere) have access to a huge variety of genetic resources. These resources are invaluable for developing new varieties that are better suited to changing environmental conditions or that better meet consumer requirements.

These resources also fit the traditional definition of a public good in that the are both non-rival and non-excludable. They are non-rival because the genetic material for producing plants can be reproduced and therefore its use by one individual does not stop someone else from using it. They are non-excludable because once a genetic improvement has been made plant breeders all over the world are quickly able to take advantage of it. These characteristics mean that there would be little incentive for the private sector to maintain these types of resources its self, which implies that displacement is unlikely to be a concern.

7.2.2 Impact to Date

Research funded by the SRP (and its predecessors) has led to the development of multiple new varieties of potatoes, soft fruit and brassicas. Research commissioned by one of the MRPs showed that the total market value of crops grown from these varieties in the UK in 2014 was around £125 million ^[19] .

Not all of this value can be attributed to the MRPs however, some of it is attributable to crop growers and other individuals who contribute at other stages of the supply chain. Furthermore, if these varieties did not exist then other alternative varieties are available. In order to estimate the economic contribution of varieties developed by the MRPs it was necessary to come to a view on the "additionality" of these varieties, i.e. the extent to which they enable growers to improve their performance relative to the next best variety available.

The research referred to above estimated that these varieties generated £44.5 million additional gross value added for the UK economy each year and supported almost 890 jobs. In Scotland it was estimated that this impact amounted to £12.9 million GVA and around 260 jobs.

As well as developing new varieties researchers supported by the SRP have also worked closely with seed developers to develop new varieties of barley that have delivered significant improvement in yield and other economically important characteristics. These improvements have enabled farmers in the UK to increase the average yield of barley by around a third from 4.95 tonnes/hectare in the mid-1980s to 6.6 tonnes/hectare in 2015 ^[20] .

The 2016 research referred to at the start of this section estimated that in 2015 these improvements added £6.5 million to the value of the Scottish barley crop, £23.2 million to the value of the UK barley crop and £152.4 million to the European barley crop.

The new varieties developed by - or in collaboration with - the MRPs have also generated significant benefits for food processors. For example, by improving the reliability of raw inputs or helping to reduce waste in the production process. The same research referred to elsewhere in this section estimated that these benefits were worth £14.2 million GVA/year to the UK economy, of which £1.4 million GVA was generated in Scotland. It was also estimated that this economic activity supported around 220 jobs across the UK.

By adding together the impacts considered in this section it can be estimated that historic research supported by the SRP has resulted in genetic improvements in crops worth £20.8 million GVA/year to the Scottish economy (and £109.2 million across the UK). It was also estimated that this economic activity supported at least 260 Scottish jobs (and more than 1,100 across the UK as a whole).

7.3 Impact Time-Scale

The benefits described in this chapter are underpinned by many years of research effort. Although research funded by the 2011-16 SRP has contributed to the realisation of these benefits it represents only a proportion of the total investment in this area of research. Despite this caveat it is appropriate to consider these benefits as part of the present analysis.

Realising breeding gains is a long-term process that requires close collaboration between industry and academia. This type of collaboration requires strong professional relationships based on mutual trust and respect. An important factor in developing such relationships is a long-term commitment by both parties.

The long-term nature of the funding provided through subsequent SRP funding rounds helps to provide confidence to industrial partners of the MRPs long-term commitment to this area of research. Without this commitment then the future gains of the research would be uncertain and there would be little incentive for industry to participate. SRP funding therefore plays a vital role in helping to overcome the market failure that would otherwise deter private investment in this type of research. For this reason the impacts associated with this area of activity can be considered additional.

One important practical reason for this is that the 2011-16 SRP has provided funding to support essential underpinning capacity, without which none of the benefits described in this chapter could have been realised. Examples include the Langhill Herd, which provides the genetic resource for achieving breeding gains in the dairy sector, and the Commonwealth Potato Collection, which has provided the genetic resources required to support genetic improvement in potatoes.

For this reason, although some of the benefits described in this chapter were underpinned by historic research, it would not have been possible to realise them without the long-term commitment embodied by the 2011-16 SRP.

7.4 Expected Future Benefits

Whether in plants or animals genetic improvement is a long-term process the benefits of which take several years to realise. The impacts described above therefore represent the annual impact of historic genetic research that was realised in 2016. As genetic improvement is permanent and cumulative the value of this annual impact will be realised again in subsequent years. The value of this annual impact will also increase year on year as the improvements made as a result of research funded by the 2011-16 programme begin to be realised.

The expected value of the additional genetic improvements realised as a result of the 2011-16 programme are explored in the two case studies below.

Case Study 7‑1 - Ribena blackcurrants

For the past 25 years one of the MRPs has been responsible for delivering the fruit breeding programme for the manufacturers of the iconic British soft drink, Ribena. In recent years one of the most important challenges facing the breeding programme has been the effect of warmer winters on blackcurrant crops in the UK and research funded through the SRP has played an important role in addressing this challenge.

Blackcurrants need a certain level of winter chilling to set fruit so a warmer winter can seriously reduce the volume of crops the following autumn. In the mild winter of 2015/16 for example some growers lost 40% of their crop.

The MRP has responded to this challenge by releasing a new variety of blackcurrant onto the market that performs well in milder winters. Although this variety has been released through the commercially funded Ribena breeding programme, the selection of the variety was informed by research on winter chilling effects that was funded by the 2011-16 SRP.

The manufacturer of Ribena expects that the new variety could save growers in the UK around £2 million/year and protect around 40 jobs. As Scotland accounts for around 28% of the value of soft fruit produced in the UK this implies the research could be worth around £0.6 million/year to Scottish producers and safeguard around 11 Scottish jobs.

An important consequence of this will be to ensure that the manufacturer of Ribena can continue to source all of its blackcurrants from UK producers, which is extremely important to the provenance of the product and ultimately its brand value. In addition to this, securing a more reliable supply of raw ingredients should help company to maintain high levels of efficiency. Ultimately this will support the continued competitiveness of the company and help to ensure that it maintains a strong market position in a highly competitive global market.

Research commissioned by the MRP in 2016 estimated that the producer benefits associated with the breeding programme (i.e the benefits to the Ribena manufacturer rather than blackcurrant producers) was worth £27.3 million GVA to the UK economy and supported around 220 jobs. Research supported by the SRP will play an important role in maintaining the value of this contribution in the future. The extent of this contribution is a matter of judgement but of the ten varieties of blackcurrants used in Ribena today, nine were bred by the MRP so it would be reasonable to attribute around 10% of future benefits to the new variety whose selection was informed by SRP funded research.

By adding together the producer and processor benefits considered in this case study it can be estimated that research funded by the 2011-16 SRP can be expected to safeguard £4.7 million GVA for the UK economy and more than 60 jobs. Of this around £0.6 million GVA and 11 jobs could be in Scotland. This is an annual impact that will occur again in subsequent years. The value of this annual impact is also likely to increase over time as uptake of the new variety increases.

Source: BiGGAR Economics

Case Study 7‑2 - Maintenance Index for dairy cows

Milk yield is an important focus for genetic improvement in the dairy industry but prolonged selection for this trait has resulted a gradual increase in the size of dairy cows. Larger animals have higher nutritional requirements but as feeding regimes were not adjusted to account for increased size fertility gradually declined.

To help address this, scientists funded by the 2011-16 SRP published a breeding value relating to the cost of keeping dairy cows. The index was constructed based on the genomic feed intake records for the Langhill herd and will enable farmers to select bulls who will produce daughters who are capable of maintaining high milk yields without growing overly large.

This is expected to have significant implications for the UK dairy industry by enabling dairy farmers to maintain milk output while reducing feed costs. The extent to which feed costs could be reduced has not yet been formally evaluated but academics involved in the project suggest an estimate of 1% would be reasonable.

On average dairy farmers in the UK spend between 7-8 pence/litre on purchased feed. By multiplying this by the total volume of milk produced in the UK in 2015 (15bn litres) it estimated that the cost of purchasing feed for the UK dairy industry in 2015 was around £1.1 billion. Reducing this cost by 1% would therefore represent a total saving of £11.4 million across the UK industry. Around 9% of the UK's dairy herd are located in Scotland so this implies that £1.1 million of this saving could be realised in Scotland.

The figures above relate only to savings in purchased feed and do not take account of the opportunity cost to dairy farmers of growing feed on-site. For this reason this impact almost certainly underestimates the true value of this research.

Source: BiGGAR Economics

The impact arising from the two case studies described above will increase the future value of the annual impact of genetic improvement to the Scottish economy. By adding together the future expected impacts considered in the two case studies above the annual value of this future benefit was estimated at £16.1 million GVA across the UK (£1.6 million in Scotland) and more than 60 UK jobs (including around 11 in Scotland).

It is important to note that this as an annual impact this impact will be realised again in subsequent years. The annual value of this impact will also continue to increase year on year as the benefits of future research are realised. As such the cumulative value of this research will continue to grow over time in perpetuity.

7.5 Summary Genetic Improvement Benefits

In total, it was estimated that the current total annual impact of research into plant and animal genetics delivers £36.0 million GVA in the Scottish economy, and £237.3 million GVA in the UK economy. It is expected that when the economic value of research funded by the programme is fully realised, that the total benefit of research will be £38.3 million GVA in Scotland and £254.5 million GVA in the UK.

Table 7‑1: Annual impact of genetic improvement (£ million GVA)

	Scotland	UK
2016
Livestock	15.1	152.7
Crops	20.8	84.6
Total	36.0	237.3
2026
Livestock	17.0	167.9
Crops	21.4	86.6
Total	38.3	254.5

Source: BiGGAR Economics. Note, totals may not sum due to rounding

7.6 Future Potential Benefits

The case studies above describe the additional annual impact expected to arise as a result of research funded by the 2011-16 SRP. These impacts could however be much higher than this as the case study below illustrates.

Case Study 7‑3 - UK grown blueberries

In 2015 the value of the blueberry market in the UK expanded by 25% to £237 million (compared with £56m a decade ago) ^[21] but it is estimated that only 1-3% of this demand is currently met by UK producers ^[22] . With demand expected to continue to grow this represents a potentially lucrative opportunity for soft fruit growers in the UK.

One of the main barriers preventing producers from exploiting this opportunity is that the leading varieties of blueberry imported from elsewhere are often unsuitable for the UK growing season. Research supported by the 2011-16 SRP is helping to address this by informing the development of new varieties that are better suited to the UK climate.

If such new varieties were to be successfully introduced to the market then the proportion of UK blueberry demand that could be met by UK producers could increase to around 50%. This represents a potential contribution of around £111 million/year to the UK economy (£31 million in Scotland) and more than 2,200 jobs (600 jobs in Scotland).

Although there is still considerable uncertainty about the magnitude and time-scale of this benefit, the history of the Scottish raspberry industry provides a strong past precedent.

In the 1990s the raspberry industry in Scotland was in crisis due to cheap imports and the effects of disease on existing plantations. From 1993 funding provided (in part) by the Scottish Government was used to develop new varieties that were more resistant to disease and could be grown in polytunnels. These varieties enabled growers to significantly improve productivity and start producing higher quality fruit suitable for the fresh market (prior to this most fruit was used in relatively low value products such jam).

If the new varieties had not been developed the Scottish raspberry industry would have had to continue to producing fruit primarily for the processing market. If this had happened then it is highly likely that the sector would by now have been largely replaced by competition from cheaper imports from Eastern Europe.

Source: BiGGAR Economics