Looking Back at R&D Investment
Public Sourced Funding
In the opening of this section, I linked two reports, one from The Simpson Centre, and one from CAPI. The CAPI report summary suggests that funding in Canada has dropped 21% since 1985, while capital funding for infrastructure has been reduced 95%, and that less than a quarter of R&D stems from private sources. While the Simpson Centre report shows that globally, from 2000 to 2016, spending on R&D has increased by roughly 16 billion, but within our country, R&D spending has fallen by $180 million from 2013 to 2022.
Finding sources of data on R&D expenditures both within Canada, and globally has proven to be challenging, though an article from van Dijk et al. (2025) provides a global data series which can be found here, that covers public R&D activities from 1960 through 2022. First, we will look at the Canadian estimates over time.
This data source (the GRAPE dataset) presents the public R&D spending in Canada in terms of 2017 CAD dollars, we can observe that a maximum funding level was reached in 1985, where afterwards up to the most recent observation of 2022, the funding level has experienced some annual volatility, with a downward trend since 2020. The year 1959 marked the formation of the Research Branch within the Department of Agriculture and Agri-Food for the nation, while subsequent years saw a range of developments and changes to agricultural policy. Though large disturbances occurred in 1983, when the Crow’s Nest freight rate was abolished, and the sector experienced a depression resulting from crashing prices in the mid to late 1980’s. These factors in combination with concerns of provincial and federal government deficits among the public led to shifts away from commodity specific supports. We can see why the CAPI report used 1985 as a benchmark to compare current spending levels, considering that year had the highest level of investment.
The apparent discrepancy between the Simpson Centre report and the GRAPE dataset likely reflects differences in data construction, scope, and currency denomination rather than a direct contradiction. The GRAPE dataset reports Canadian public agricultural R&D expenditures in constant 2017 CAD and suggests relatively stable funding levels between 2013 and 2022, declining only modestly from $1.0635 billion to $1.0554 billion, a decline of $81 million. In contrast, the Simpson Centre report cites a decline from $860 million in 2013 to $680 million in 2022, without specifying units or methodological details.
Based on the reported values, the Simpson Centre estimates appear to correspond closely with the OECD General Services Support Estimate (GSSE) database, specifically the Agricultural Knowledge and Innovation Systems (AKIS) category which refers to the network of researchers, extension services, input suppliers, and producer organizations through which agricultural knowledge is generated and transmitted to farm operators. It is a useful lens here because productivity outcomes depend not just on the level of R&D investment, but on how effectively that knowledge moves from research institutions to frontline producers. Filtering the OECD data for Canada and the AKIS subcategory yields expenditures of approximately USD $884 million in 2013 and USD $697 million in 2022, closely matching the figures reported by the Simpson Centre. However, when expressed in Canadian dollars, these same OECD estimates are approximately CAD $910 million in 2013 and CAD $907 million in 2022, indicating comparatively little change over the period.
Taken together, these comparisons suggest that much of the perceived decline emphasized in the Simpson Centre report may be driven by exchange rate effects and differences in accounting frameworks rather than a substantial reduction in real domestic agricultural R&D expenditures. The GRAPE dataset, which is explicitly constructed in constant Canadian dollars, therefore provides a more appropriate basis for evaluating long-run domestic public investment trends in Canadian agricultural R&D.
A notable development to this discussion is that the 2025 Canadian federal budget includes a comprehensive expenditure review, with planned reductions across many of the publicly funded organizations. Agriculture and Agri-Food Canada (AAFC) which receives a significant portion of public R&D funds has to meet up to a 15% “savings” target over the next three years. This comes to a reduction in expenditures of $154.7 million by the 2028-2029 fiscal year. Resulting from these austerity measures three primary research centers across the country alongside four satellite research locations will be closing, with a 12 month wind down period. The Deputy Minister of AAFC, Lawrence Hanson is quoted saying “We are not reconsidering this decision” when questioned on the possibility of reversing the shutdowns due as backlash from industry participants arose over the announcement.
Now we will look at how Canada stacks up to other countries investment levels in agricultural R&D, and under purchasing power parity, avoiding the various local currencies.
According to this data source, as of 2022, Canada is among the lowest spenders in public agricultural R&D from the selected countries, yet recorded the highest rate of total factor productivity (TFP) growth from 2011 to 2020. This apparent paradox warrants some caution in interpretation. A strong TFP performance alongside low R&D spending does not necessarily mean Canada has found a more efficient path to productivity growth. It may instead reflect a lag effect, where returns are being realized today from investments made one to two decades prior, a dynamic well documented in the agricultural economics literature. If that is the case, the current trajectory of declining public investment and stagnant private spending raises legitimate questions about whether Canada’s productivity leadership can be sustained into the next decade.
Taxes, Regulations, and Protection: The Plight of Private Research
An article from McKinsey & Company finds that since 2010 publicly traded agricultural companies have underperformed the S&P 500 index. Though this is not entirely surprising given the large returns from technology, data, and artificial intelligence players over recent years, it still warrants further investigation. In its analysis of 134 publicly traded companies, McKinsey notes that median R&D expenditures have remained flat. Once inflation is considered, real R&D expenditures have contracted over their study period. It is noted that those in the top quintile have strong levels of capital expenditure relative to sales, which shows up in R&D expenditures among other avenues.
While this underperformance reflects global dynamics, Canada is not insulated from them, the same structural pressures dampening private returns on agricultural investment internationally have contributed to a domestic private R&D base that has failed to grow in real terms.
The linked CAPI report on Canada’s agricultural R&D details the status of private-sector sourced investment, re-iterating the global declines seen to public R&D, while the country has not seen private sources step into the ring. We will look at the Canadian data pertaining to private research expenditures soon, but first we will walk though CAPI’s theorization on why this gap has been occurring.
The report finds that a primary driver on the lack of growth seen stems from a lack of incentives to action. Canada has shown a lack of strong intellectual property protections for plant breeding relative to the United States and European Union. While regulations surrounding intellectual property for plant breeding have a carve out of the Farmers’ privilege exemption allowing farmers to re-use farm grown seed for replanting in subsequent years. Discussion on changes to the legislation alongside resistance to tightening the exemption play at odds in efforts to stimulate higher investments. Put plainly, breeders operating under stronger IP regimes can more reliably recoup their investment through proprietary seed sales, giving them a structural incentive to invest that their Canadian counterparts lack. It is also noted that tax programs provide potential incentives to private participants. The Scientific Research and Experimental Development (SR&ED) tax incentives allow the potential of income deductions from allowable SR&ED expenditures incurred in that tax year, alongside tax credits that can be applied against the income tax payable. Though the SR&ED program has been criticized as having a complex claims process often favoring firms with the capital and expertise to fully take advantage of the program.
The CAPI report also summarizes that regulatory barriers create an obstacle due to the lengthy period and high costs of getting genetically modified plant species approved, while variety registration processes also build in further restrictions.
Now we will look to Statistics Canada data on private in-house R&D expenditure, as well as the counts of the performers of said R&D activities for agriculture (excluding aquaculture). Due to data limitations, years 2014 through 2017 were omitted, while the most recent reported year is 2023.
The increasing share of Canadian-controlled expenditures in recent years is better explained by foreign-controlled firms pulling back from domestic R&D activity, falling from a peak of $69 million in 2020 to $34 million in 2022, rather than by any meaningful increase from Canadian firms, whose spending has remained volatile with no clear upward trend over the period. We can also observe the stark difference in scale between privately-funded R&D and publicly-funded R&D discussed prior. It should be noted that this data series on expenditures only considers “in-house” activities, omitting contracted or outsourced research, which could impact the scale relative to other sources.
A quick comparison of the compositions of private and public R&D spending between Canada and Australia follows. This uses the GRAPE dataset alongside the above StatsCan data for Canada, and values from ABARES for Australia.
Statistics Canada data on private in-house agricultural R&D expenditures show that nominal spending has remained essentially flat since 2016, with a nominal compound annual growth rate of approximately 2%. Once adjusted for inflation, however, real expenditure has declined, with estimates ranging from -0.9% to -3.1% annually depending on the period examined. This contrasts sharply with Australia, where private agricultural R&D has grown at approximately 4.2% annually in real terms since 2005 (to the 2024-25 period), with the private sector now accounting for nearly half of total agricultural R&D expenditure compared to roughly 12% in Canada.
