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Unprecedented growth in agricultural productivity over
the past century can be attributed largely to investments
in agricultural research and technology development. Many
developments—including more efficient
agricultural machinery, agricultural chemicals and fertilizers,
genetic improvements in crops, and changes in farm management
techniques—have transformed U.S. agriculture. These developments
have contributed to an abundant and affordable food supply
for consumers.
Most early research efforts sought to replace increasingly
expensive resources with less expensive ones. For example,
the development of farm machinery helped offset increasing
labor costs. Currently, demands for safer, healthier, and
more convenient foods, natural resource conservation, environmental
protection, and animal welfare are changing the agricultural
research portfolio. These demands relate directly to agricultural
products and to the impacts of production methods.
Research Demand
Many different forces affect research investment, and
these forces differ for the public and private sectors.
Some technology development is in response to consumer
demand. This kind of focused research is often called "applied." The
private sector will respond to market demands for new agricultural
technologies, but markets may not address all external
effects of production. Environmental regulation, for example,
may increase the development of some environmentally benign
technologies and the demand for those technologies.
Research can also be conducted without an immediately
marketable product, usually for two reasons: basic research
(to gain fundamental knowledge) and the provision of public
goods. Basic research is conducted most often in the public
sector because the results of the research lack immediate
private payoffs. The results, though, can provide a scientific
foundation for later public and private developments. Developments
in biotechnology have blurred the distinction between basic
and applied research. For example, "theoretical" fields
such as genomics, proteomics, and bioinformatics have been
supported strongly by the private sector.
Public goods represent a market failure because an individual's
use of the good does not diminish its availability to others,
and it is difficult to exclude anyone from using the good.
National defense exemplifies a public good because once
security is provided for one, all receive the same protection.
In agriculture, food safety and ecosystem stewardship have
public good characteristics. While the payoff to society
of investing in basic and public good research is high,
the results of such research generally cannot be appropriated,
so the private sector has little market incentive to conduct
this research. That is where government steps in—through
funding and technology transfer activities.
The roles of the public sector and private industry in
agricultural research have undergone significant changes
in the last two decades due to developments in science,
policy, and markets. The public sector was the primary
investor in agricultural research prior to the 1980s, but
now the private sector funds the development of many new
agricultural technologies (see Agricultural
Research and Development: Public and Private Investments
Under Alternative Markets and Institutions for more
information).
 d
Public Sector Research and Development
Public agricultural research involves a unique partnership
between the Federal Government (chiefly USDA) and the States
(see the chapter on Sources
of Public Sector Agricultural Research Expenditures).
USDA, the State Agricultural Experiment Stations (SAES),
and cooperating institutions together conducted over $5
billion of research in 2008 (USDA Current Research Information
System). USDA conducts much of its inhouse research through
its research agencies, primarily the Agricultural Research
Service, the Forest Service, and the Economic Research
Service. The largest expenditures on agricultural research
in the public sector are made by SAES and cooperating institutions,
which rely on Federal and State funding, as well as the
private sector.
Historically, USDA has used several funding instruments
to provide research money to States. Formula funds are
allocated in block form to States based on rural population
and number of farms. Research administrators have numerous
options in how they distribute formula funds.
Agricultural and Food Research Initiative (formerly the National Research Initiative)
competitive grants are allotted
by peer review panels. Special grants are awarded by Congress,
whereas other USDA contracts, grants, and cooperative agreements
are awarded by formula or at the discretion of USDA research
agencies. (See Agricultural
Research and Development: Public and Private Investments
Under Alternative Markets and Institutions and
Colleges
of Agriculture at the Land Grant Universities: Public Service
and Public Policy (National Academies Press)
for descriptions and comparisons of these mechanisms.)
Within the public agricultural research sector, natural
resource and environmental issues are of interest because
they have both local and national dimensions. State research
investments might be focused on local problems, with Federal
funds designated for larger geographic issues. For example,
the development of technologies to improve water quality
and increase water-use efficiency can have critical local
benefits. However, benefits
from improved water quality accrue beyond regional jurisdictions.
Overall, public research on natural resources and the environment
accounted for 18 percent of total public agricultural funds
in 2008, roughly the same percentage as in 1998.
The research categories that we use may not capture all
research that can benefit the environment. Scientists self-classify
their research using USDA's Current Research Information
System (CRIS) and may not consider "natural resource
and environmental research" as the primary objective
of their work. For example, plant breeders may produce
resistant varieties that require fewer agricultural chemicals,
which may improve water quality. Still, they may classify
the research under "plants and their systems."
Private Sector Research and Development
Private industry has been playing a more important role
in agricultural research, not only boosting research investments
but also expanding into new areas of research. Private
industry expenditures on agricultural research have increased
50 percent in real terms between 1978 and 1998. In 1998,
60 percent of private sector agricultural research expenditures
were allocated to biological and chemical technologies,
such as agricultural chemicals, plant breeding, and animal
health, compared with only 19 percent in 1960.
Advances in the biological sciences and expanded intellectual
property rights (IPRs) protection for biological innovations
have stimulated private sector efforts in technology development.
Basic research in biology, microbiology, and computing
created new technological opportunities for private agricultural
research. For example, gene transfer technologies enable
researchers to tailor crops for specific uses, such as
crops resistant to disease, pests, herbicides, or harsh
environmental conditions; and crops with increased nutrition
or improved food processing traits.
Expanded IPRs for biological inventions and new plant
varieties have allowed innovating firms to capture a greater
share of the benefits from research. The Patent Act of
1790 was established to "promote the progress of science
and useful arts," but biological inventions were considered
products of nature at that time, and were not thought to
be patentable. The extension of IPRs to new plant varieties
and biological inventions, including biotechnologies, has
further stimulated private companies to invest in plant
breeding. The Plant Patent Act of 1930 and the Plant Variety
Protection Act (PVPA) of 1970 established plant breeders'
rights for new plants and plant varieties. In 1980, a Supreme
Court decision (Diamond v. Chakrabarty) established the
use of Utility Patents for biological inventions, specifically
microorganisms. Further decisions by the Patent and Trademark
Office broadened the use of Utility Patents for plants
(in ex parte Hibberd in 1985) and animals (in ex parte
Allen in 1987). The number of plant patents, Plant Variety
Protection Certificates (PVPCs), and utility patents issued
over the last 30 years has risen. International
organizations have attempted to harmonize intellectual
property protection in order to facilitate trade and technology
development.
 d
Public and Private Collaboration in Agricultural Research
and Technology Transfer
Another change affecting technology development in agriculture
has been the growth in collaborations between the public
and private sectors. Before 1980, U.S. patent policy limited
collaboration between public and private researchers, since
the Federal Government assumed ownership of any inventions
that resulted from federally funded research. The Government
Patent Policy of 1980 (Bayh-Dole Act) granted institutions "certainty
of title" for inventions resulting from federally
funded research, and allowed Federal laboratories to issue
exclusive licenses for patents of their inventions. The
1980 Stevenson-Wydler Technology Innovation Act mandated
that each Federal research agency develop specific mechanisms
for disseminating government innovations. The 1986 Technology
Transfer Act gave government agencies additional means
to foster technology transfer by authorizing public-private
Cooperative Research and Development Agreements (CRADAs).
This mechanism allows USDA to share technologies at various
stages of development, research results, and scientific
resources (though not money) with industry through joint
research ventures.
Incentives for technology transfer may be very important,
particularly for innovations that provide public-good benefits.
Potential valuable technologies developed in the public
sector are not automatically marketed by the private sector.
USDA and the SAES transfer a variety of innovations to
private firms and directly to farmers, both shielded and
unshielded (i.e., protected by IPRs or not) to ensure the
provision of useful technologies to the agricultural sector
(see
The
CRADA Model for Public-Private Research and Technology
Transfer in Agriculture).
Public entities like USDA can patent inventions meeting
the criteria of the U.S. Patent and Trademark Office, then
grant an exclusive/co-exclusive (most often), limited exclusive,
or nonexclusive license to a private company to use or
market the invention. In 2000, licensing revenue was less
than 0.5 percent of USDA's R&D budget. Still, the licenses
offer an incentive to private firms to develop and deploy
new technologies.
Other forms of cooperative effort between research entities
include research consortia, which bring together several
institutions to undertake joint research. These consortia
increase funding support for strategic research and research
that is considered to be long term and high risk (see Public-Private
Collaboration in Agricultural Research: New Institutional
Arrangements and Economic Implications). Large-scale
efforts in plant genomics are underway to map, sequence,
and analyze the genomes of several species that are important
for developing new crop and livestock varieties with desired
traits.
Likely Research Trends
Several developments will influence the research portfolio
over the next decade. Markets are beginning to develop
for some public goods, such as products grown with "environmentally
friendly" agricultural practices. If private firms
can profit from providing products with desired social
characteristics, research will accommodate such trends.
Another development that may affect future R&D investments
is recent consolidation of seed, biotechnology, and agricultural
chemical industries (Fernandez-Cornejo, 2004). There were
381 mergers, acquisitions, and other strategic alliances
in the agricultural input industry between 1980 and 1998,
and 10 firms accounted for almost half of that activity
(see Concentration and
Technology in Agricultural Input Industries). Increased market power resulting from
industry concentration and increased appropriability of
technology may enhance incentives for private-sector innovation,
leading to greater agricultural productivity. On the other
hand, too much market power may inhibit technological advancement
by creating barriers to entry for new firms and limiting
access to critical technology and knowledge.
Developments in multiple scientific disciplines have led
to several new fields: bioremediation, nanotechnology,
genomics, proteomics, and bioinformatics. The expanded
platform of knowledge will increase the options for agricultural
research, development, and technology transfer.
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