Return on R&D investment

Naturally they want to know that there is a return on that investment – that the money foregone will give a boost in the future.

Return on investment (RoI) is important. It helps with evaluation of investment profitability, comparison of different opportunities, effective allocation of resources, and making decisions for sustainable growth and improved efficiency based on data.

The problem with taxes, rates, retentions and levies is that the farmers paying them aren’t in control of the decisions – the government, councils, co-operatives and levy-body organisations to make the investments on their behalf… and then justify the investments.

Doing so can be difficult in research because of time lags, the presence (or not) of intangible benefits (for example to do with the environment or simply the acquisition of knowledge), difficulty attributing gains to specific research, and the inherent uncertainty and risk in research outcomes. Tracking becomes even harder with the biological complication of agriculture; weather, pests and market shifts all affect the outcome. Further complicating the calculation is that benefits are likely to diffuse widely and then decay as new technologies emerge.

Given the difficulties, it isn’t surprising that results from attempts at RoI calculations are greeted with scepticism, with the ongoing question of ‘could I have used that money better myself?’

The answer is ‘probably not’, at least in terms of advancing sector knowledge.

Reliable research results are underpinned by team expertise, infrastructure and scientific understanding. Individual farmers might have a new idea but developing and rolling that idea into the wider community is a different matter.

Almost everything done on farm has been the subject of research at some time or another, from soil and pasture management, to milking/shearing frequency and precision topdressing. Ideas have come from everywhere, and been integrated, developed and refined in a way that tangles any calculation of RoI.

In 2009, AGMARDT funded a book conceived by Agricultural Journalist Alan Emerson. Future Food Farming contained short pieces by academics, scientists, researchers and businesspeople. All gave their words freely because they wanted to contribute to agricultural development in New Zealand. Professor Richard Archer, then Head of the Institute of Food, Nutrition and Human Health (now retired) wrote a section on fenceless farming: “Each cow wears a device – perhaps an ear-tag, perhaps a cowbell. The device measures the cow’s activity level and orientation and perhaps some health indices. It might even sniff for methane. Most importantly the device emits sounds to guide a cow forward, right, left; perhaps guide a cow to drink, to urinate, to defecate, or to rest.”

The concept hit the media and scepticism was rife.

Cow Manager, the ear tag, had its genesis in 2004 in the USA. Halter, Craig Piggot’s version of Fenceless Farming, was launched in 2016. Ideas circulate between people. A change in thinking and advances in technology allow development of a concept that was previously not possible. RoI depends on the starting point chosen… 2004? 2009? 2016?

Further, the calculated value is different in a plot from on farm, from a region and for the country. Extrapolation from plot results is affected by farm management, weather and adoption. Adoption depends upon how the new research can be integrated into a farm system… and whether it solves a problem that is actually being experienced or makes things easier in some way without affecting the bottom line negatively.

Despite the difficulties, attempts have been made to calculate RoI. In Treasury’s 2006 report, the economists concluded that “there is typically a significant positive relation between domestic knowledge and the growth of productivity” and estimated (based on their preferred model) an annual rate of return of 17%.

All models depend on constraints and assumptions. Starting points are important, as is the time frame considered and the end point.

Whatever the actual figure is, we are on the right side of the ledger – farmers do together what no farmer can do alone. Farmer investment means that the ‘sunset industry’ of the 1990s has continued to supply a bigger portion of an inflation-adjusted bigger economic pie in New Zealand. There’s research on that, too.

• Dr Jacqueline Rowarth, Adjunct Professor Lincoln University, is a farmer-elected director on the boards of DairyNZ and Ravensdown, and a member of the Scientific Council of the World Farmers’ Organisation.