A Funding Model for Grant-based Agribusiness Research in Canada

Governments in Canada have shifted to matching funding models for agricultural research over the last twenty years. They now encourage organisations through matching funds and tax credits to invest in agricultural research. A model is proposed that gives agricultural organisations long-term, secure funding. It suggests an organisational structure and then uses three streams of funding to provide funding for research. The essence of the proposal is that A small Canadian Controlled Private Corporation (CCPC) can generate at least $100,000 annually for perpetuity research for a $100,000 up front initial investment.’A Holding Company that controls at least two CCPCs, one for investment and analysis and one for operations, is the proposed governance model. It will invest in capital markets, services, systems, marketing and analysis on agricultural products, their markets and the value chain of those products. By balancing grants, tax credits and investments, study will be sponsored. Up to three quarters of the funding will be provided by matching funds from Federal and Provincial Governments. Study done at a CCPC eligible Ontario research institution is eligible for a 35 percent federal investment levy, three 34.5 percent distinct Ontario tax credits, and 16.5 percent federal and provincial tax deductions. An option strategy is used for acquisitions, which needs a one-time investment and can produce 30-60 percent per year. A vertical credit put spread where out-of-the-money puts are purchased and sold that expire in four months uses the index option. In Canada, capital gains account for half of the tax rate on other earnings.

Author(s) Details

Adam Dale
Department of Plant Agriculture, University of Guelph, Simcoe Research Station, Box 587, 1283 Blueline Road, Simcoe, Ontario N3Y 4N5, Canada.

Elliott Currie
Department of Management, University of Guelph, 74 MacDonald St., Guelph, Ontario, N1G 1M8, Canada.

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