the economics of wheat research in developing countries: the one hundred million dollar puzzle

Pergamon

WorldDevelopment, Vol. 23. No. 3, pp. 401412, 199.5 Copyright 0 1995 Elsevier Science Ltd

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0305-750X(94)00127-8

The Economics of Wheat Research in Developing

Countries: The One Hundred Million Dollar Puzzle

MYWISH K. MAREDIA and CARL K. EICHER* Michigan State University, East Lansing, U.S.A.

Summary. - Currently, 1,150 scientists are carrying out wheat improvement research in developing countries with an annual budget of around $100 million. Because of the recent reduction in agricultural research budgets, this study marshalIs evidence from 71 wheat research programs in 35 developing countries to address the following puzzle: what is the optimal size, type and location of wheat research programs in the developing world? The analysis nveals that if research spillins are taken into consideration. almost half of the wheat improvement programs in developing countries are inefficient. The efficiency of wheat research in many National Agricultural Research Systems can be increased by reducing the size of research programs, consolidating state and federal research programs. and shifting from wheat-breeding research to caumrinn suillins from other countries and from the International Maize and Wheat Improvemenr Center (CiMM+Tj.

1. INTRODUCTION

The success of the Green Revolution in the 1960s and 1970s generated political and financial support for a major expansion in global agricultural research capacity. Global investments in agriculhual research rose in real @fIation-adjusted) terms at an annual rate of 6.2% over the 1961-65 to 1981-85 period (Pardey, Roseboom and Anderson, 1991). Much of this expansion was focused on increasing the size and number of commodity research programs, which were heavily dominated by plant-breeding research.

The Green Revolution was spearheaded by the rapid diffusion of semi-dwarf varieties beginning in the 1960s. This provided a convincing justification to expand research programs in the developing world. Today, most developing countries have national commodity research programs ranging from a small group of scientists to several hundred scientists working at different research stations throughout the country (Bohn and Byerlee, 1993). According to a recent CIMMYT I survey, more than 70% of the scientists in wheat research programs in the developing world are working on improving wheat varieties - i.e. wheat improvement* - while the remaining 30% are working on agronomic or crop management research. The survey also identified more than 1,150 full-time equivalent (FTE) scientists (B.S. degree and above) cany- ing out wheat improvement research in developing countries with a total annual expenditure of US$lOO million in the early 1990s (Bohn and Byerlee, 1993).

This paper focuses on a case study of wheat, the

second most imponant food crop in developing countries. Without question, investments in wheat research have generated remarkable success. Wheat yield\ In developing countries have grown at a faster rate lhan yields of any other food commodity. lmprovemenr\ In yield and the maintenance of disease resistance m spring wheats alone, in the post-Green Revolution period generated benefits of three billion U.S. dollars in 1990 (Byerlee and Moya, 1993). The estimated annual rate of return on investment in spring wheat improvement research by National Agricuilural Research Systems (NARSs) and CIMMYT from rhe late 1960s lo 1990 is estimated lo be 5 I c/c (Byerlee and Traxler, 1994). This high rate of return can be attributed lo the research spillovers generated by the joint CIMMYT-NARS international research and testing network. More than 40?& of the total wheat varieties released in developing countries in the last three decades have directly come from this collaborative CIMMYT-NARS international research program (Byerlee and Moya, 1993).

Numerous exposr country studies of the returns to investment in wheat research have found that the average annual rate of return is in the range of 25 - 100%. suggesting that wheat research has been a profitable

* The authors wish 10 thank Derek Byerlee, Eric Crawford. James Oehmke and John BEM~~ for valuable comments and suggestions. We alone, however, are responsible for the views expressed in this paper. Final revision accepted: September 8. 1994.

401

402 WORLD DEVELOPMENT

investment. Caution should be used, however, in extrapolating these results to all developing countries and into the future. On the one hand, many of the countries studied have large and well-established wheat research programs and are known (I priori to be “winners” (e.g., Mexico, Pakistan, India, Argentina, Brazil). On the other hand, there is only one rate of return study on wheat research in sub-Saharan Africa even though numerous countries have wheat research programs for a relatively small wheat areas. More- over, most of the rate of return studies cover periods of rapid growth in wheat productivity, especially during the Green Revolution period in the late 1960s and the 1970s when returns to research were unusually high. Since most of the wheat area in developing countries is planted to high yielding varieties, however, it is likely that returns to the research investments have declined in the 1980s and early 1990s. In other words, investments in wheat research, whether measured in terms of dollars or number of scientists, have increased faster than the gains in productivity of the varieties released (Byerlee, 1994).3

Most rate of return studies have been conducted at a very aggregate level and have not shed much light on the performance of agricultural research systems in terms of size (e.g., number of scientists), number of research programs and payoff to research at different levels such as local, national, interregional and international. These issues should be debated, especially in light of the severe budget constraints facing agricultural research in NARSS.~ The International Agricultural Research Centers (IARCs) are also facing a severe financial crisis (Either, 1992, 1994). For example, the number of core-funded senior scientific staff of CIMMYT declined by 42%, i.e. from 95 in 1989 to 55 scientists in 1994.

Despite cutbacks in public financial support, however, for agricultural research in many countries in the 199os, “ . ..there has been very little analytical or empirical research on the relationship between size and productivity in agricultural research” (Ruttan, 1982, p. 167). A few studies provide some general rules of thumb. A decade ago the World Bank suggested that a desirable investment target for research for many countries would be an annual expenditure “equivalent to 2 percent of agricultural gross domes- tic product” (World Bank, 1981, p. 8). But this norm is derived from industrial countries with a century or more of experience in mobilizing political and financial support from farm organizations, commodity groups, private firms and state and federal organizations (Either, 1989). Several authors have quantified the scientist-years required for different levels of research capabilities (e.g., Dagg, 1988), for a commodity research program (e.g., Trig0 and Pifieiro, 1984; Daniels and Nestel, 1993) and for a national research system.’ The levels of research investments and size of research programs recommended by these

studies are much higher, however, than current levels in many developing countries. For example, it is estimated that developing countries spent an average of 0.41% of agricultural GDP on agricultural research in 1981-85 (Roe and Pardey, 1991), which is well below the World Bank’s level of 2%. Pardey, Roseboom and Anderson (1991) also studied 130 countries and found that 39 NARSs had fewer than 25 agricultural researchers. In the light of this evidence, the goal of 250 scientists for a small country suggested by Ruttan (1987) seems exorbitantly high (Either, 1990).

The general lack of attention to the efficiency of NARSs did not matter as long as research budgets were increasing rapidly from the mid sixties to the mid eighties. It is becoming increasingly important, however, that decision makers focus on increasing the efficiency of national and international research systems, especially since resources available for agricultural research have fallen sharply in many NARSs and IARCs. Research is urgently needed on how best to allocate limited research funds and guide research managers to increase the efficiency of national research systems.

This paper addresses the $100 million puzzle: what is the optimal size, type and location of wheat research programs in the developing world? This puzzle is addressed through a global study of the payoff to 71 wheat research programs in 35 developing countries. This analysis of the payoff to different types of wheat improvement research programs and research spillovers is used to draw lessons on what the NARSs, CGIAR and donors can do to increase the efficiency of resources invested in wheat research in the 1990s and beyond.

2. GLOBAL WHEAT IMPROVEMENT RESEARCH: DESCRIPTIVE AND ECONOMIC

PROFILE

(a) Investments by NARSs

There is a wide variation in the distribution of the US$lOO million (measured in 1990 US$ PPP)6 invested annually in wheat improvement research across different regions in the developing world (Table 1). In general the size of wheat research (in terms of numbers of scientists and expenditures) in a given region is congruent with the importance of wheat in that region. For example, about 80% of the value of global wheat research is spent in the Asian and North African regions, the largest wheat- producing regions in the developing world. Likewise, sub-S&ran Africa has the lowest number of wheat scientists and research expenditures on wheat improvement. India and China employ more than half of the total number of wheat researchers in the devel-

THE ECONOMICS OF WHEAT RESEARCH 403

Table 1. A regional analysis of wheat improvement research, early 1990s

Research Total Total Research exp. as %

research Exp. per wheat Number of exp. per t of gross No. of expenditure scientist production scientists of wheat value of

No. of scientists (M 1990 (000 1990 1990-92 per M t of (1990 wheat Region/Country NARS FE) PPPS) PPPS) (M t) wheat PPP$) produced*

Sub-Saharan Africa 9 39 4.4 113 2.1 18.4 2.10 0.18 W. Asia & N. Africa 12 344 45.3 131 46.5 7.4 0.91 0.25 Asia 6 719 41.3 57 168.3 4.3 0.25 0.02 Latin America 11 133 16.3 123 19.5 6.8 0.84 0.17 All developing countries 38 1,234 107 236.4 5.2 0.45 0.08

(33)f (::,t

(5.9)$ (0.87)$ CIMMYT 36 8.3 230 -5 - _ _ Australia 1 72 6 83 13.6 5.3 0.43 _ United States 1 278 44 1.58 65.1 4.6 0.73 _

Source: Bohn and Byerlee (1993); CIMMYT data file; FAO Production Yearbook * Since wheat oroduction is valued at international mice. research expenditures are estimated at official exchange rate. t At official ex’change rate (1992).

.

$ Unweighed average across all countries. 8 Not estimated.

oping world (Bohn and Byerlee, 1993). ’ The average intensity for wheat improvement

research in the 31 developing countries is estimated to be 0.08% of gross value of wheat production in the early 1990s. Developing countries employ an average of five researchers on wheat improvement research per million tons (M t) of wheat produced or US$O.45 per ton. These figures are comparable with intensities in Australia and the United States. Data for developing countries, however, are dominated by a few large countries, especially China and India, with relatively low intensities of research (measured in terms of wheat research expenditures per ton of wheat). For example, it is estimated that 15 countries with less than half a million ha under wheat cultivation employ an average of 10 scientists per M t of wheat and spend about four dollars in wheat improvement research per ton of wheat produced (Bohn and Byerlee, 1993).

The differences in research intensities in developing and industrial countries are even more striking at the program level. A research program is defined as a group of researchers (usually at one research station) with a mandate to develop and release varieties for a given geographic area. Although most small countries have only one wheat research program, many countries have numerous programs at various levels of government (e.g., province, state, federal) as well as at universities and private companies. The average size of a wheat research program in developing countries is estimated to be 7.2 FTE scientists, which is signifi- cantly larger than an average of 4.3 FTEs in industrial countries (Bohn and Byerlee, 1993). The research intensities in developing countries (as measured by the number of researchers per M t and research expenditures per ton of wheat produced) are also signifi-

cantly higher than in programs in industrial countries. Overall, wheat improvement programs in developing countries employ five times more researchers per M t of wheat and spend three times more on wheat research per ton of wheat produced than in programs in industrial countries.8 The inescapable conclusion that emerges from this comparative analysis is that research costs and intensities in developing countries are higher than in industrial countries because developing countries have a larger number of scientists carrying out research in smaller target areas (i.e. area under wheat cultivation).

(b) The international wheat improvement research system

The international wheat improvement research system consists of the collaborative research and testing efforts by CIMMYT, located in Mexico, and the NARSs around the world. CIMMYT’s total annual expenditures on wheat improvement is estimated to be about eight million dollars with a total employment of 36 Fl’E researchers in the early 1990s (Table 1). These resources are expended by CIMMYT on the improvement of wheat germplasm with the aim of combining high yield potential and wide adaptation. This goal is achieved through the international system in three ways: large number of crosses (12,000 per year) made by CIMMYT breeders in Mexico: the use of “shuttle breeding” that allows CIMMYT scientists to alternate selection cycles in different environments with high yield potential that differ in altitude, latitude, photo- period, temperature, rainfall, soil-type and disease spectrum; and the wide testing of advanced lines in


collaboration with NARSs throughout the world. Cost estimates indicate that on every dollar spent

by CIMMYT, NARSs in aggregate spend about one dollar (measured at official exchange rate) on local screening and testing to realize the spillovers from CIMMYT (Byerlee, personal communication). The goal of the CIMMYT-NARSs research and testing network is to develop widely adapted varieties that can be used by NARSs either as final products or inter- mediate products (i.e. parent materials) in their breeding programs which ultimately reduces the cost of wheat improvement to NARSs.

(c) Global spillovers

One of the common justifications for large investments in crop improvement research in developing countries is the belief that biological technology is not very transferable (i.e. it is location-specific). This explains why countries in the developing world have been urged to establish strong breeding programs in order to develop new varieties and/or adapt imported germplasm to local needs (Jane& 1982; Evenson, 1994). Maredia (1993) presents evidence, however, of large wheat breeding spillovers. Technology spillovers are debned as the potential for a variety to grow well outside the location for which it was developed9 Technology spillovets can result from the direct transfer of varieties developed in one location and used in another or indirect transfers in the form of using imported germplasm as parents in local crosses.

Maredia (1993) estimated a “spillover matrix” using CIMh4YT’s international spring wheat yield trial data and found that global research spillovers for wheat are very large (Table 2). Maredia found a significant yield advantage to varieties bred by national programs for a specific environment, relative to varieties bred by national programs for a different envi-

101 ’ I I I I 1

1966-70 1971-75 1976-80 1981-U 1986-90 Periud

Source: Bye&c aad Moya (1993)

Figure 1. Percentage of alI wheat varieties released in developing countries based on direct and indirect transfers from

CIMWT-NARS international research system, 196640.

romrtent (i.e. the relative yield along the diagonal are nearly always higher than the yields off-diagonal in Table 2). CIMMYT-based materials, however, have a significant yield advantage over locally bred materials in several environments (as indicated by relative yields higher than 100 for CIMMYT culti~ars).~~ These materials do especially well in irrigated and high rainfall environments where they provided a yield gain of 11-13% over cultivars developed by NARSs for the same environments. There may be some tradeoffs between yields and breeding for matu- rity and local consumer tastes. But wheat varieties with international sources of germplasm have demonstrated wide adaptability and acceptability in developing countries.

International spillovers (direct and indirect) are common in wheat improvement research. Direct spillovers (varieties developed through the CIMMYT-

Table 2. Relative yield performance of wheat cultivars of different origins in various megaenvironments. 198049

Relative yield in megaenvimmnent where tested*

Megaenvimnment of variety origin

1 Irrigated 2 High rainfall 3 Acid soils 4A Winter drought 4B Early drought 5A High temperature 6 High latitude CIMMYT/Mexicot

1 2 3 4A High Acid Winter

Irrigated rainfall SOilS drought

100 95 84 90 95 100 81 92 89 96 100 85 99 94 78 100 90 97 89 91 88 86 92 82 88 89 84 87

111 113 99 101

4B Early

drought

88 zz

83 100 89 91

107

6 I$ High

temperature latitude

102 94 89 96 98 100 91 93 90 99

100 92 84 100

101 98

Source: Based on Maredia’s (1993) analysis of CIMMYT’s Intematiunal Spring Wheat Yield Nursery (ISWYN) data. * Yield expressed relative to the yield of cultivars originating in that megaenvirumnent (=loO). tCultivars derived from CIMMYT crosses and released in Mexico.


NARS collaborative research and testing network) account for more than 40% of the 1,300 wheat varieties released in developing countries over the past 25 years (1966-90) (Byerlee and Moya, 1993). In addition, indirect transfers (varieties developed by using CIMMYT-NARS germplasm as parents in adaptive breeding programs) account for about 25% of alI released varieties in developing countries. ‘Ihus, about two-thirds of all wheat varieties released in developing countries during 1966-90 were directly or indirectly based on germplasm developed by the CIMMYT-NARS network. The share of these varieties in developing countries has increased to over 80% in the past decade (Figure 1).

Country-to-country spillovers are also common, accounting for about 10% of all wheat varieties released in developing countries. Varieties developed in India, for example, have been released in 14 countries, including the Sudan, Egypt, Pakistan, Afghanistan, Bangladesh and Nepal (Byerlee and Moya, 1993).

This evidence suggests that spillovers” of wheat- breeding research are larger than reported to date and suggests that the international research network has a comparative advantage in producing widely adapted wheat varieties. Wheat varieties are more robust than many other crops in terms of international transferability because the production environments and local differences in quality preferences are not as marked as in rice, maize or beaus. As a result, it is often more efficient for NARSs to import wheat varieties from the international system (or other countries with a similar environment) than carrying out local wheat breeding programs. A major challenge for managers of NARSs is to examine how to develop a local scientific capacity to capture direct spillins - varieties developed by other national and international programs.

(d) The economics of wheat research investments

Investment in agricultural research in general has been justified on the grounds that it yields high returns - i.e. it is profitable. Because of the financial constraints of the 199Os, the justification of agricultural research programs will have to be based not only on the evidence of high rates of return but also in a com- parison of returns in alternative uses of the resources. This means that research allocation decisions must be carefully assessed in terms of alternative research options (Evenson and Binswanger, 1978).

In wheat improvement research, there are three basic strategies corresponding to the three types of research programs:

- A testing program composed of about one breeder to screen international, regional and national nurseries and then release the varieties that

are best adapted to the local environment. - An adaptive breeding program that includes a team of scientists from three or four disciplines who develop new varieties by crossing local or foreign materials and releasing varieties best adapted to local environments. - An advanced breeding program that includes a research team to carry out basic/strategic research ranging from specialized facilities for screening for disease and insect resistance to molecular biology.

Each of these three research strategies embodies a different blend of technology transfer. A testing program is most dependent on direct technology transfers, while an adaptive breeding progrsm relies on both direct and indirect technology transfers. An advanced research program relies more on direct and indiict knowledge transfers. The challenge for a NARS is to compare the efficiency of these research strategies for each commodity in the light of present and projected technology transfers, research costs, availability of human resources and research lags (Binswanger, 1974). Research managers need to resolve the issue of how much to rely on direct and indict transfers in creating new technologies.

As a research program shifts from a testing to a breeding program, it invests more in human and phys- ical resources and thereby expands its indigenous research capability. The increased investments are commonly justified on the ground that the varieties developed by a breeding program will be better adapted to local agro-ecosystems and therefore yield more than imported varieties. Maredia and Byerlee (1994) have expanded on Maredia (1993) and developed guidelines on the minimum level of production to justify investments in testing and breeding programs. They calculate the costs and benefits of a testing and breeding program as follows:

costs = Benefits =

where, S Cs

P

Q

K

where.

is number of scientists (FIE) is cost (including overhead costs) per scientist is wheat price per unit of production is wheat production in the mandate area without improvement research is the shift parameter defined as: K = gta

g is the research-induced gains in production (kg/ton/year) t is the number of years since the first release of wheat variety by the research program, and

WORLD DEVELOPMENT

a is the percentage of total wheat production in the mandate area attributed to wheat improvement research.

Based on the estimated average cost per researcher of US$35,000 in developing countries (Table l), projected f.o.b. and c.i.f. wheat prices (in real 1992 dollars) and Maredia’s (1993) estimates of 6% average yield gains for locally developed varieties over other NARS varieties (which yields about 0.3% per year yield difference between a testing and breeding pro- grarr~),~~ Maredia and Byerlee (1994) estimate that a testing program with one FIE scientist would require 15 thousand tons of wheat production in the mandate region for that program. With an optimistic assumption of 1% annual yield gains from locally developed varieties, a wheat-breeding program employing three FIE scientists would require about 100 thousand tons of wheat production to be more profitable than a simple testing program with one FIE scientist.13 Allowing a 2% yield advantage to varieties developed by a local breeding program over those screened and released by a testing program, wheat-breeding research requires 320 thousand tons of wheat production to be more profitable than testing research,

indicating that the efficiency of research investments in a breeding program is very sensitive to research spillins.

Maredia and Byerlee (1994) used the same cost- benefit model to calculate the net present value (NPV) of current investments of 71 wheat improvement programs in 35 developing countries (Table 3).ls With the assumption of 6% yield advantage to locally developed varieties, 16 out of 71 research programs in Groups I and II were found to be earning negative NPVL6 on their current investments in wheat improvement research or eaming less than in a testing program. Taking into account, however, the empirical evidence of international research spillins in wheat- breeding research, so that locally developed varieties yield only 2% higher than varieties screened by a testing program, the number of inefficient programs (Group I and II) almost doubled from 16 to 3 1. In other words, if the potential research spillins from the international system and/or other countries with similar environment are included in the analysis, at least 31 out of 71 research programs (12 in Group I and 19 in Group II) in developing countries would be investing more in wheat research than justifiable or investing in the inappropriate type of research - i.e. in breeding rather than testing research.

Table 3. Wheat research programs in developing countries classified by the NPV decision criterion and levels of research spillins

Croup Result of the analysis Interpretation Regions

Levels of research spillins (% yield gains of locally

developed varieties) mper M t of

6% 2% wheat *

I NPv<o

Il o<NPv <NPVof testing

Program

III NPv> NPV of testing

Program

Cannot justify current level of investment in wheat research (testing or breeding)

Investments in breeding are earning positive NPV, but less than testing

Current investments in breeding mom profitable than testing

SubSaharan Africa W. Asia & N. Africa South Asia & China Latin America

Total

Sub-Saharan Africa W. Asia & N. Africa South Asia & China Latin America Total

Croup I & II: Total

Sub-Saharan Africa W. Asia & N. Africa South Asia & Chiia Latin America Total

Grand Total

Number of research

Programs 2 2 4 4 0 0 6 6

87

12 12

1 5 8.8 0 4 1 3 2 7 4 19

16 31

6 2 1.9 18 14 21 19 10 5 55 40

71 71 3.9

Source: Maredia and Byerlee (1994) * Average across all programs under 2% yield gains assumption.


The efficient wheat research programs earning the highest NPV (Group III) have large wheat producing regions - i.e. Turkey, China, India, Pakistan, Brazil and Mexico. The unprofitable research programs in Group I can be explained by the large size of research programs relative to the small production in the mandate region and is reflected in the large number of scientists per M t of wheat produced. The research programs in Group II countries are inefficient because they are concentrating on wheat-breeding research rather than testing imported varieties and selecting the best varieties for local ecosystems. These results raise serious questions about the efficiency of global investments in wheat improvement research in developing countries, especially in smaller countries aud even in regions of large countries with a small area under wheat cultivation.

3. STRATEGIES TO INCREASE THE EFFICIENCY OF WHEAT RESEARCH IN NARS

In the climate of declining donor and government support for agricultural research, the economic issues of efficiency, comparative advantage and economies of size and scope will become increasingly important issues for research managers and for donors. The wheat research puzzle is basically a question of how to allocate $100 million a year to ensure its greatest efficiency. Should NARS spend more or less on wheat research? In what type of research? What should be the size and composition of NARSs’ wheat research programs? How should wheat research be organized? These are some of the hard questions that we shall address in this section.

There are four strategies to improve the efficiency of wheat research investments in NARSs.

(a) Reducing the size of research programs

Many developing countries have established wheat improvement programs that are too large in relation to the area under wheat cultivation in the mandate area. This generalization is true not only for small countries but also for many large countries with numerous wheat research programs spread over small or over- lapping mandate areas.

In addressing the question of the size of a research program, the issues of critical mass and composition of research skills require special examination. Many research managers assume that every wheat producing country needs a wheat-breeding program with a team of breeders, pathologists, cereal chemists, and other disciplines. In some countries the size of the mandate area is large enough to justify a full-fledged breeding program. But in many other countries, the size of the mandate area may justify a testing program with one

FTE researcher who relies totally on importing and screening varieties from other countries or from the international system. Finally, in some countries the mandate area may be so small that it cannot support even one FTE researcher in a testing program. For these countries a plant breeder can work part-time on wheat improvement research and part-time on other crops. For research programs that have large wheat research teams relative to their mandate area, it is suggested that they should reduce the size of their research team so that it is congruent with the level of research capability justifiable for the size of the mandate area.

(b) Consolidating research programs

The second critical issue is the number of wheat research programs per country. In many countries provincial pride and politics have played important roles in the establishment of redundant and over- lapping wheat improvement programs. For example, some countries have wheat research programs in each state/province, irrespective of the size of the mandate area. India, for example, has 50 wheat research improvement programs with at least one in each state where wheat is grown. To be sure, noneconomic factors such as autarky, food security, regional pride and prestige play important roles in the decisions on the size and annual expenditures on agricultural research.

Nevertheless, recent studies reveal that wheat varieties developed in one country are performing well in other countries with similar environments (Mare&a, 1993; Byerlee and Moya, 1993). The potential for spillovers - for wheat varieties to grow well outside the location for which they were developed - are inhibited by environmental differences rather than political boundaries. Hence, in a perfect world without political boundaries, there would be a strong case for a few international and regional breeding programs linked to small testing programs at key sites in major wheat production zones. This is the basic research strategy employed by some multinational seed companies.” The degree of centralization of breeding research will depend on the tradeoff between the location specificity foregone because of the inability to tailor research to a specific environment and the economies of size gained in aggregation. The empirical evidence of research spillovers suggests that this tradeoff in wheat breeding is less than in other types of research such as crop management and natural resource management research. Hence, if $100 million were to be expended on wheat research in a perfect world, a substantial portion of current investments in wheat research in NARSs would be in a global and regional research programs. But this is not politically feasible. Nevertheless, countries should try to replace research programs serving political areas (e.g., state)


with regional programs for major wheat environments within a country and encourage scientists to partici- pate in research networks in countries with similar environments. Consolidation of programs with over- lapping mandates (e.g., a university and a state exper- iment station both carrying out wheat research in a given state) can reduce duplication of research programs and total research costs and increase the overall efficiency of resources devoted to wheat research. For example, India might be able to consolidate and phase out some of its 50 wheat research programs and develop programs to serve major agrocliiatic zones. Similarly, encouraging private investment in wheat research can reduce the size of public sector research programs. The relatively small size of national wheat improvement program in Argentina (less than 20 WE) is attributed to the dominant role of the private sector in wheat research in that country.

(c) Shifring the emphasis of research programs

The emphasis of a wheat improvement program may vary from a screening/testing program to an advanced research program with capabilities to con- duct molecular biology research. Two central factors will determine the type of a research program that is economically justifiable for a region/country. The first is the size of the research mandate area. The second is the possibility of research spillins - varieties developed by other programs that might be utilized effec- tively in the mandate area. The availability of research spillins in the form of wheat varieties that perform well in the mandate area may permit a NARS to invest in a modest testing program instead of a more costly breeding program.

This study has shown that when research spillins are taken into account, many wheat research programs where found to be investing heavily in a breeding program even though a smaller (testing) program would have been more profitable. This study suggests that many developing countries should convert their wheat-breeding programs into testing programs with an eye on importing wheat varieties from neighboring countries, regional research networks and the intemational research system, and testing them in local ecosystems.

(d) Capturing research spillins

Research spillins can substitute for local research. Hence, the efficiency of wheat research in many developing countries can be enhanced by relying more heavily on capturing spillins from other countries and regional networks such as the PROCISUR program in the southern cone countries of Latin America (Evenson and Da Cruz, 1992) and from CIMMYT.

Hence, research managers should evaluate different crops and components (such as breeding, agronomy, crop management, natural resource management) of a research program and determine whether they can make greater use of research spillins. Crops and research areas with a large potential for direct spillins (such as wheat breeding) will require less intensive research than those whose results are location- specific. This would enable a NARS to reallocate resources from plant breeding research to crop management and natural resource management research which are generally more location-specific.

The international wheat research network has provided free wheat germplasm to developing and industrial countries for almost three decades. There is impressive evidence that varieties developed by this CIMMYT-NARS collaborative program are widely adapted and perform well in several wheat production environments, especially in irrigated and high rainfall environments. About two-thirds of the wheat varieties released by developing countries over the past three decades have been directly or indirectly based on lines from CIMMYT-NARS international system (Byerlee and Moya, 1993).i*

The wide adaptability of these cultivars suggests that the direct importation of wheat technology is often a superior alternative to the development of a local, state and national breeding programs in some environments. For example, varieties developed in Mexico are highly transferable to the irrigated environments of Pakistan (Maredia, 1993). In fact, 80% of the wheat varieties released in the Punjab for the normal duration irrigated environment over 198 l-90 were developed from imported lines (mostly CIMMY’T) (Byerlee, personal communication). Given these possibilities of direct spillins from exter- nal sources, even a large country such as Pakistan can increase its research efficiency by improving its capacity to import and test varieties from other sources for its irrigated environment instead of investing heavily in several wheat-breeding programs. Of course, NARS investments in a well-developed local screening and testing program is needed to capture such research spillins.

4. IMPLICATIONS FOR THE CGIAR AND DONORS

In the late 1980s and early 199Os, public expenditures on agricultural research in the Consultative Group on International Agricultural Research (CGIAR) system and NARSs came under increasing scrutiny. In addition, donors started to question the relative emphasis that should be devoted to commodity versus natural resource management research in the CGIAR system. Even though donor support was declining in real terms during 1990-92, five new cen-


ters were added to the CGIAR system during this period. Because of this expansion and the cut back in donor support, the CGIAR is under severe linancial stress. The budgets of the commodity-focused centers (CIMMYT, IRRI, ICRISAT) have been quietly sliced and it is proving increasingly difficult for the CGIAR to implement its expansion plan (Either, 1992, 1994).

Various studies have demonstrated the comparative advantage of international centers in breeding research. Because of the sharp budget reduction, however, the CGIAR management and donors should examine this issue and take the hard decisions to pro- tect the teal budgets of global commodity centers to ensure that they have the capacity to generate a steady source of research spillovers for developing countries and reduce the costs to NARSs of crop improvement research (e.g., by providing specific disease r&is- tance, germplasm search to increase diversity, etc.).

The combination of the international transferability of wheat varieties and the overinvestment of many NARSs in wheat-breeding research has some important implications for donors. First, the confirmation of economies of size in wheat-breeding research sends a powerful signal to donors that they should invest enough resources in international systems to ensure that it maintains its global comparative advantage in wheat breeding and to continue the free diffusion of germplasm to developing countries. Second, donors should support and encourage many NARSs, especially those with a small area under wheat cultivation, to develop the capacity to import technology from the global research system rather than investing inwheat- breeding programs. Third, donors should encourage NARSs to consolidate uneconomic wheat research programs, increase their participation in regional programs (Either, 1989), and improve their capacity to screen improved varieties from other sources.

5. CONCLUSIONS

This paper addresses the puzzle of where to invest $100 million in wheat improvement research in developing countries each year. Should research be concentrated in a global wheat research system that maximizes complementarities among countries through a global research network? Should research be concentrated in large wheat-producing countries (such as India, China, etc.) under the assumption that these nations will share improved varieties with other developing countries. Should wheat-breeding research be carried out in small countries in Africa?

The findings in this paper raise serious questions about the efficiency of $100 million expended annually on wheat improvement research in developing countries. Ironically, donors have sharply reduced their support to CIMMYT over the last five years even though CIMMYT-NARS collaborative system has

directly or indirectly provided two-thirds of the (1,300) new wheat varieties released by developing countries from 19fX-90. If declining donor support for CIMMYT continues, it might lead to the increased cost of wheat improvement by NARSs.

The findings of this study challenge the conven- tional wisdom that wheat varieties are very site- specific. This unexpected finding is a tribute to the productivity of a global research center (CIMMYT) collaborating with hundreds of NARS scientists through the international testing network. It also pro- vides a convincing r&on d’etre for global centers of specialization in commodity research and the free public distribution of germplasm throughout the world (Winkehnann, 1994). The robust nature of the international transfer of wheat germplasm suggests that the managers of NARSs should pay special attention to technology transfer in determining the size of wheat research programs and how much to invest in wheat breeding versus less expensive testing of imported varieties in local environments. Decisions on resource allocation for agricultural research should be made on a commodity-by-commodity basis through the use of some kind of a cost-benefit analysis that takes the following factors into account: environmental diversity, research spillins, research costs, research lags and the size of the mandate area.

The global analysis of wheat improvement research in developing countries reveals the danger of applying “rules of thumb” (for, e.g., each NARSs should have a minimum of 250 scientists) in determining the size of a national public research system. This paper has presented evidence that many wheat improvement programs in developing countries are operating at unprofitable levels, i.e. they are overinvesting in wheat improvement research by placing too much emphasis on wheat breeding and too little attention to developing an efficient capacity to borrow improved varieties from the global CIMMYT-NARS collaborative research system. Nevertheless these results do not apply to crop management research which produces location-specific management practices.

In looking ahead, it is clear that many NARSs in developing countries should shift their focus from increasing the size (e.g., number of scientists, number of research programs) and concentrate on improving the quality and efficiency of resources already invested in wheat improvement research by reducing the number and size of breeding programs, consolidating breeding programs and making greater use of varieties from the international research and testing system.

To be sure, these findings on wheat research cannot be generalized to other commodities. Similar studies are needed on rice, maize and other commodities. In the future less attention should be given to studies of rates of return to agricultural research in countries that are known a priori to be “winners” and more attention


to global comparative studies along the lines of the in developing countries. During the harsh funding studies reported in this paper. Ultimately, the results climate of the 199Os, national and international of both country-specific rate of return studies and research programs must be soundly managed to global studies of the payoff to research on a particular ensure continued high returns to investments in commodity can contribute to an informed debate on research. how to improve the efficiency of agricultural research

NOTES

1. CIMMYT is the acronym in Spanish for the Imemational Maize and Wheat Improvement Center in Mexico. CIMMYT wss established in 1966 as the second Intemational Agricultural Research Center (IARC) in what has become known as the CGIAR (Consultative Group on International Agricultural Research) system.

2. Wheat improvement is defined to include wheat breeding as well as inputs from other disciplines, such as agronomy, pathology, and cereal chemistry that contribute to variety development. This defmition does not include agronomic (e.g., spacing, timing, level of fertiliier application, etc.) research aimed at developing improved cultural practices.

3. This situation is neither unique to wheat nor to developing countries. In the case of US maize breeding research, Duvick (1991) notes that, “ the cost of research per unit of advance will become increasingly large.. . Over the past 60 years, increase in maize yielding ability at a rate of approximately 1.5%/year have been accompanied by increases in number of US maize breeders at a rate of about 4%/year.. . Thus, yield gains, although still possible, are incmasingly expensive. Put another way, genetic gain per breeder per year decreases, ammally” (Duvick 1991, p. 5).

4. For example, because of the cutbacks in foreign aid and the general levelling off and decline of donor and government support for agricultural research, many NARSs have experi- enced severe budget constraints for crop improvement research (Traxler and Bye&e, 1992, Macagno and G6mez- Chao, 1993). The national wheat research program for India, for instance, is expecting a substantial decline in its research budget in the next five-year plan (ENS Economic Bureau, 1993). Because of these financial retrenchments, many NARSs have been forced to make hard scientific and financial decisions on whether or not to reduce the number, size and type of commodity research programs.

5. Dagg (1988) estimates the scientist-years for different levels of research capabilities as follows: monitoring, 0.2; introduction and testing, 0.4; adaptive research, 0.8; applied research, 3.0; and basic research, 10.0. Trig0 and Pifleiro (1984) estimated a minimum research module for one commodity as consisting of four chief researchers (with M.S. or Ph.D.), eight specialists (with B.S.), administrative staff, materials and equipments. Based on these estimates of Trig0 and Pifieiro, Ruttan contends that the miniium aggregate level of professional capacity in agriculture for national programs of technology transfer, technology development, rural development and regulating and service activities is around 250 scientist (with training at M.S. and Ph.D. levels) for even the smaller (but not the smallest) countries (Ruttan, 1987, p. 84).

6. The PPP (purchasing power parity) represents a synthetic exchange rate that seeks to compare the relative cost in local curmncies of a specific basket of (traded and nontraded) goods and services. It is &fined as the price of a commodity bundle in local currency divided by the dollar price of the same bundle. The PPP exchange rate is increasingly used to make comparisons across countries (for example see Pardey era/., 1991; the WorldBank, 1993; Bohn andByerlee, 1993). Compared to the official exchange rate, the PPP exchange rate tends to increase expenditure data in developing countries. The corresponding estimate of wheat research expenditures in developing countries at the official exchange rate is USMl million (in 1992 dollars).

7. Bohn and Byerlee (1993) estimate that there are about 200 and 410 FlE scientists working on wheat improvement research in India and China, respectively.

8. Because of the active private sector and university research programs, the mandate areas more than frequently overlap in industrial&d countries, which explains part of the difference in research intensities at a country level and at the program level within a country.

9. The total spillover effects of research can be a combined effect of price spillovers, technology spillovers and the spillover of scientific knowledge (Davis, Gram and Ryan, 1987). In this paper we focus only on technology spillovers.

10. Transferability is &fined here in terms of yields only. Them may be other desirable traits which can be more effi- ciently developed through local breeding programs, such as cultural specific quality traits. This is particularly true for crops such as rice and maim, where consumer tastes may be quite specific to a country or region within a country.

11. Spillins and spillovers refer to the same phenomenon of externality. The terms are used interchangeably depending on whether a research program is receiving or producing the externality.

12. Maredia (1993) assumed a 0.3% yield gain per year for varieties developed by a local breeding program over the varieties released by a testing pmgram. This would yield an absolute advantage for 1ocalIy bred varieties of about 6% in 20 years, which corresponds to the average yield advantage of wheat varieties developed by national pmgrams in a given environment over those developed by national programs in other environments estimated using the international yield trial data. This also corresponds to the optimistic scenario that excludes the potential direct transfers of CIMMYT- NARS varieties, which dominated locally bred varieties of national programs in several environments (last mw in Table 2). In other words, the assumed difference of 0.3% per year


underestimated the potential research spillins of wheat improvement research in many environments.

13. Note that these figures for the threshold size of wheat production are lower than reported in Maredia (1993) due to two important differences. Fist, the results reported in this paper are based on the average cost per researcher estimate at official exchanee rate of US%35.000 as anainst Mamdia’s (1993)

Maredia’s and Byerlee’s (1994) estimates are based on this

estimates of US$60,000 based on the PPP exchange rate.

conservative assumption of no yield gains “without the

Second, Mamdia (1993) estimates NPV based on the assumption that yields “without the research program” in any

research program” (i.e. attribute maximum benefits to a local

given year will be maintained at the levels achieved in the previous breeding cycle. If a research program is located in

research program).

close proximity (measured both in terms of environmental and geographic proximity) to other research programs (which is true for many research programs in large countries such as India, Pakistan, China, Turkey), this may be a good approximation of the expected yields without the research program, The ex post rate of return studies conventionally assume, however, no yield gains without a research program, thus attributing cumulative yield gains to research investments in each year. To be consistent with these studies,

14. The empirical evidence presented in Table 2 suggests that if research spillins from the international system (the last row in Table 2) are taken into account, a testing program can potentially develop wheat varieties that perform better or at least at par with locally developed NARS varieties. The assumption of 2% yield advantage reflects this empirical xesult.

15. The NPV criterion is widely used in project evaluation. It measures net discounted returns (i.e. benefits less costs) to investments in a given project.

16. A negative NPV suggests that because discounted costs are greater thau discounted benefits, investments in a given project are unprofitable.

18. About 10 out of 36 (more than 25%) developing countries surveyed had released wheat varieties solely based on imported lines.

17. For example, recognizing the basic similarities in seeds, Pioneer Hi-Bred International has united their North American and European research operations that do not need to be duplicated (Longworth, 1993).

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the economics of wheat research in developing countries: the one hundred million dollar puzzle

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