Dr. Blake Cooper, HybriTech Seeds International

Manitoba - North Dakota Zero Tillage Workshop

Minot, ND February 4, 1998

I would like to thank Mike Dick and the Board for the invitation to speak to you today. The topic I was asked to cover is "A Look at Biotechnology and the Future of Hybrid Wheat". Now these are two separate and distinct topics --- but I hope to demonstrate to you by the end of my talk that they are in fact both integral parts to the future of wheat farming.

Outline

* Why Hybrids vs. Varieties ?

> Yield Advantage and Net Return on Investment > Yield Stability

> Hybrids the chosen Vehicle for Biotechnology

* Biotech -- Uncoupling Management Practices > Sawfly Example

> Roundup Ready Wheat Example > Fusarium Head Blight Example

In the first part of my talk I will cover some of the logic behind "Why Hybrids vs. Varieties?"

We will discuss hybrid yield advantage and how it relates to net return on investment. I'll show you some evidence to demonstrate that hybrids are more stable performers compared to varieties. And we will cover why hybrids will most likely be the delivery mechanism for many of the new biotechnology traits.

In the second part of the talk I would like to share some examples of where value added biotechnology traits might be able to help out with wheat production. For this audience today, I would like to show three specific examples of how I believe biotechnology traits will allow us to reap the beneficial parts of no till or reduce tillage but uncouple those desired benefits from some of the unwanted side effects. We will cover an example with the wheat sawfly, RoundUp Ready ^TM Wheat, and Fusarium Head blight resistant wheat. I'm certain that you if you farm wheat in the US or Canada you will be able to relate closely with one or more these examples.

I would ask each of you to take just a moment and contemplate which of the many inputs you invest in growing a good crop of wheat is the most important to the final results. Some of you may list your man hour time inputs, or soil fertility, or moisture retention derived through no till --- but if you really think about it, I think you would all recognize that the choice of variety or varieties you plant each year will have a profound effect on the final outcome at harvest time. In fact, I would submit to you that year in and year out the choice of variety and the quality of seed stock that you plant is this single most important decision that you will make.

With that thought in mind let us discuss "What is Hybrid Advantage?" Because let's face it unless there was a real and significant advantage to hybrids you wouldn't have any reason to switch over from planting the same varieties you do today.

This slide summarizes a ton of information, but if we cover it carefully it is not nearly as busy as it looks. This particular set of data is from a HRSW trial of 333 F1 hybrids tested on the John Hankey farm in Park River, ND in 1996. But I could have picked any one of dozens of sets of similar data from other locations and other years and even from other classes of wheat like HRWW in Kansas or SWWW in the PNW. The general trends would be much the same.

The bottom axis is Hybrid Yield Advantage (in Bu/Ac) compared to the average of eight check cultivars grown in the same trial. The checks averaged 76.3 Bu/Ac in this particular trial and are represented by the red vertical line at the 0 Bu advantage mark. The heavy blue curve that looks like a mountain range on the graph represents the count or frequency distribution of the 333 hybrids rounded to the nearest whole Bu relative to the average of the checks. The hybrids in the part of the curve to the left of the red line yielded less than the check varieties and conversely those hybrids to the right of the red line out performed the checks by the amount indicated on the bottom axis. The blue line goes up and down a lot because this is interval data but the pink dashed line is the best fit regression through the data and you can see it forms a more or less normal bell shaped curve. This is a small but important point, because quantitative genetics tells us that if we measure a population for any metric trait (like yield, or height or maturity) that the distribution should more or less fit a normal curve and if it doesn't then there is likely something wrong with the data. In this case the fit to normal is quite good so we can add some extra confidence that the data set is real to life.

Just two more points to note on this graph. First the top of the bell shaped curve indicates that ON AVERAGE the hybrid performance was about 4-5 Bu/Ac over the checks. Finally if we set a TARGET HYBRID ADVANTAGE of at least 8 Bu/Ac over the checks we see that almost 1 out of every 3 hybrids tested met or exceeded the TARGET. A few in the far right hand tail even bet the checks by 20-30 Bu/ Ac. They arc the one's you retest in next years trials.

Hybrid Yield Advantage is one thing --- but in today's world we need to look at net economic return to really determine if hybrid wheat pays. In the HRSW market class the net economic return is determined by three factors. Certainly Yield is the major factor, but frequently protein and test weight premiums (or discounts) contribute significantly to the final return. This set of data is a multilocation multiyear analysis of about fifteen hybrids and almost as many varieties. The net return was calculated by first determining what each bushel of grain was worth based on the protein content and the test weight. A 10 year average of the protein differential at the Minneapolis Grain Exchange and a typical local elevator test weight discount schedule was applied. The 10 year MGE basis for 14% protein and 58 lb. test wt. was $4. 10/ Bu. (I know you would all like to sell a few bushels for $4. 10 today --- but using the ten year average seemed the only fair way to approach this since some years there are good premiums for protein and in others there is little or none). The net return was finally calculated by multiplying the yield in Bu/ Ac x the $Price/ Bu and subtracting $180/ acre which is what the University estimates it now costs to grow and acre of wheat in the Red River Valley. If knocking $35 to $45 off of the net returns in this example makes the figures seem a little more realistic to your situation feel free to do so --- in fact I hesitate to show you these figures because based on this set of data I don't know if wheat farming is a real promising business venture, if you have to risk $180/Ac to get that investment back plus less than $40/Ac in net return in today's market, you could due much better investing in stocks or bonds.

If we had grown an AVERAGE HYBRID from the previous graph (one with +4 to 5 Bu/Ac hybrid advantage) the picture is better but still not good enough to cover the extra investment in hybrid seed. You need to be above that +8 Bu/Ac TARGET line on the previous graph --- but when you do get well above the target line like with the top five hybrids listed individually you can begin to see where hybrids might start to make some real economic sense, even if the seed cost / acre was double what you would pay for a certified variety seed.

I recently attended an excellent seminar about financial planning in which the expert spoke about risk tolerance relative to the stock markets volatility. In many respects what he said about long term investment for retirement applies equally well to the risks of farming wheat.

One of the first things that always comes up relative to the increased cost of hybrid seed is what happens if you have a complete crop failure. Well lets take a look at what would happen if over a ten year period, assuming that you had a complete slate wiping hail storm 5 days before harvest so that all your investment except harvest costs had been incurred. What would happen if you got wiped out one year out of ten? Two years out of ten? A third of the time or worse? You can readily see from this graph which allows for $15/Ac higher seeding costs verses certified seed that if you are getting completely wiped out 3 years out of ten that you are below break-even if you planted varieties, are only slightly to the good if you would have planted an average hybrid, but still turning a measurable profit if you had planted a top end hybrid. If you are getting wiped out more than 40% of the time you probably have already started looking for a new profession, so even tough it may be irrelevant I would like to point out that if we extended this on out to 6,7,8,9 years out of ten you really are no worse off if you had invested in hybrids vs. varieties.

This little analysis assumes that hybrids are no more consistent in year to year performance than varieties. Granted a complete failure due to hail or other natural disaster will wipe out a hybrid.crop just as thoroughly as a variety. But you are more likely to encounter years in which the crop is well below expectations but still worth harvesting. Let's say you had 1 year that was a total failure and 3 -4 others in which your net return was 50% or less of what you would have in a "good" year. You are pretty much right back at the three year break-even point on the graph.

What I want to tell you is that in those years when things are not so good both varieties and hybrids suffer -- - but in many cases the hybrids will suffer less because they have genetic buffering capacity to take what ,'mother nature" deals them better than varieties. The investment analyst will plainly tell you that the best way to "beat" the ups and downs of the market is to diversify your investments and I'll echo those sentiments about wheat. Do NOT put all your eggs in one basket be it hybrid or variety. Plant several different wheat's that complement each others strengths and weakness and in the long run you will be way ahead.

Well enough about hybrids --- Lets take a look at biotechnology. Most of you are familiar with the old disease triangle. In order to have disease develop you have to have a susceptible host, a virulent pathogen capable of attaching the host and an environment favorable to establishing the disease.

I would like you to start thinking about the disease pyramid, because besides the things we normally would consider as pathogens like fungal and viral diseases there are also "higher order parasites" like insect and nematode pests. In addition to the environment in the broad sense, like El Nino, which we don't much control over there are management practices, like no till, seeding rate depth and timing, fertility, etc. which we do have considerable control over and these all interact the traditional host / pathogen / environment triangle to produce a given out come.

To shed even a new and greater light on this complex interaction, I would ask you consider biotechnology as a light passing through a clear prism rather than a simple triangle or even a pyramid. Biotech won't be the answer to all or problems, and in fact it might even create a few new ones we have to deal with --- but in large measure it may provide a much greater ability for us to control the final outcome.

To further demonstrate this point I would like to go through three specific examples of how Biotechnology might allow us greater control.

The first example I will use will relate to reduced tillage and our old friend the Sawfly.

Reduced tillage or no till offers some real advantages in trying to grow wheat in summer fallow situations where moisture is a limiting factor, and where a good deal of the moisture received comes in the form of snow during the fallow year. These tillage practices have not only resulted in significantly higher yields --- but they are also environmental success stories for reducing soil erosion due to wind and water runoff. Ah, but when we changed our management practices and put away our moldboard plows, we also inadvertently created an environment that was much more suitable for some pathogens and pests, including Mr. Sawfly who is now a serious problem in Canada, Montana and western North Dakota. Heavy infestation with sawfly increases lodging and reduces harvestable yields (which is exactly the opposite of what we tried to accomplish in the first place).

Last year I was really confronted with the irony of what we had done when I observed thousands of acres of wheat in Montana being swathed as close to the ground as could be done in an effort to gather the crop into some excuse for a windrow that could be run into a combine. The remaining stubble was so insignificant that it could not have done a very effective job of preventing erosion or trapping snow fall for the next crop, which I'm sure will pay the price even if sawfly doesn't attack it. In effect we got a "double whammy" for

all our good intentions. And unfortunately, at least some growers have been looking for a real sandy section to try to get the rust scoured off of their old moldboard plows.

What we need is a way to "disconnect" the desirable advantages of notill from the unwanted disadvantages associated with the sawfly.

Well here is one place where if we shine a little bit of that Biotech light through the prism we should be able to put a real crimp in Mr. Sawfly's ability to earn a living. There are numerous possible solutions to developing transgenic wheat that would limit the sawfly's ability to successfully attack wheat. While I prefer not to go into specific details, suffice it to say that some of these methods could be quite "elegant" solutions and if they were managed properly in the field it would be very difficult if not down right impossible for the sawfly to develop new resistant strains or biotypes. It is not to far fetched to foresee that in 6-8 years from now we could have a genetically engineered wheat that will allow farmers to reap all the benefits of notill but not suffer the deprivations caused by sawfly.

A second example of how biotech may help farming in the future would be the use of RoundUp ^TM ready cereals to permit in season control of a wide range of weeds, including some that are very difficult (if not down right impossible) to control with the current management practices and range of available herbicides. Each of you currently are facing some type of weed control problems that might range from Downy Brome (cheat), Jointed Goat Grass or Sulfanyl Urea resistant Kochia. Some of these weed problems are really exacerbated by the tillage practices which you currently use. Availability of RoundUp Ready ^TM wheat would allow you to disconnect the increased weed pressure from those tillage practices.

However, we do need to use real caution before we place Round Up resistance, into wheat because, Round Up is currently one of the most effective tools in your arsenal for weed and volunteer wheat control in summer fallow situations. Years and years of use would indicate that weeds are not likely to develop resistance to Round Up on their own in nature, like they readily do to many other herbicides. However, we would want to be very careful to prevent introducing a transgenic resistance into weedy species, like Jointed Goat Grass which shares a common genome with wheat. So we would have to be absolutely certain that the genes for resistance were not inserted on the D genome where they might eventually work their way into jointed goat grass. Similarly, before we put RoundUp Ready ^TM wheat on the market we need to evaluate the potential effect it would have on your current ability to control volunteer wheat in chem. fallow or no till situations. We wouldn't want to make wheat itself into a weed that could not longer be controlled with Glyphosate. All biotech traits need to be carefully examined before they are placed into commerce to weigh the advantages against any potential disadvantages.

The last example I will give relates to Fusarium head blight resistant wheat, which is a project currently showing some real progress in the laboratory. As you can see from this slide the wheat plants that have been genetically engineered to resist Fusarium ( FHB) show a rather marked decrease in the spread of blight symptoms within the heads. This will still require some additional help and time from conventional breeding to incorporate these transgenes into elite adapted lines and maybe even pyramid in some other sources of resistance to FHB, before these will be ready for the field. Most of the attempts to move "natural" resistance genes in from unadapted germplasm like Sumai#3 also brings lots of unwanted baggage, like poor quality, rust susceptibility, lodging, etc. on the DNA attached to the genes of interest. This new type of transgenic resistance would allow for incorporating only the bare minimum of DNA required to get the desired effect without bringing in all of the negative baggage. Wherever these different sources of resistance are dominant, the best way to pyramid them would be to use hybrids to get the maximum resistance but with the least amount of unwanted baggage. While I doubt if this type of technology will ever allow us to go back to wheat after wheat in the Red River Valley, since that is still a pretty good recipe for financial ruin even with out FHB --- but I can see it allowing us to practice reduced tillage or permit rotations after other crops, maybe even after corn in Ohio and Indiana which have also shown an increased risk of getting FHB.

I have given an example of how biotech might help us deal with an insect, weed competition, and a fungus. But for just about any problem you can think of there are one or more potential biotech solutions, if we think long enough about the problems we should be able to find those solutions that not only solve the immediate problem but allow us to "disconnect" the solution from other unwanted side-effects of other critical management practices like no till.

In summary, I would like to restate why I foresee the future of wheat lies in hybrids. We are rapidly approaching the point where hybrids will yield enough more net return on investment that they will become an economic reality (if not necessity). How soon and how fast will it happen --- only time will tell --- but I am confident that at some point in time in the not to distant future a significant portion of the acreage now planted to varietal wheat will be planted to hybrid wheat and it will be because it makes good economic sense. I am also confident that hybrids will be the chosen vehicle to deliver many new Biotechnology advances onto the farm.

I'm sure that some biotech traits may reach the farm in varietal wheat's. These may come from the public breeding programs, and may even come from some private programs using publicly developed lines where the monetary return to the developer would be to significantly increase usage of some chemical product like a herbicide, or such. But for many of the most "elegant" and valuable traits the delivery system will be in the form of a hybrid wheat. It will be hybrid because it will allow some measure of control on how the technology is deployed and it will be in a hybrid because that will be the least complicated way for the developer of the technology to recover a fair return on his investment just like the farmer expects to make a fair return on his investment. A new biotech advance might easily cost 10's of millions of dollars and 6-9 years to get it to the farm gate from the time it is conceived, so you can expect that with that kind of investment we will have to be very careful to work on problems that are serious enough to be of real economic value once they are solved.

Finally, I'm beginning to see Biotech traits not only as a means in and of themselves ---- but as an integral management tool that will allow us to reap the full benefits of other desirable practices (like no till) without having to put up with some of the unwanted "side effects" that they also bring. These will be like the rainbow of colors coming out of the prism and will be good for mankind.

Thank You for your attention and invitation to speak.