A Funding Model for Grant-based Agribusiness Research in Canada

Over the last twenty years, Governments in Canada have moved to matching funding models for
agricultural research. They now encourage organizations to invest in agricultural research through
matching funds and tax credits. A model is proposed which provides long-term, stable funding to
agricultural organizations. It suggests an organizational structure, and then uses three funding
streams to provide the research funding. The essence of the proposal is that ‘A small Canadian
Controlled Private Corporation (CCPC) can, for a $100,000 up front initial investment, generate at
least $100,000 annually for research in perpetuity.’
The suggested governance model is a Holding Corporation which owns at least two CCPCs, one for
investment and research, and one for operations. It would invest in capital markets, services,
processes, marketing and do research in agricultural products, their market and their value chain.
Research would be funded by matching grants, tax credits and investments. Matching grants from
Federal and Provincial Governments can provide up to three-quarters of the funding. Research
conducted at an eligible Ontario research institute for a CCPC is eligible for a federal investment tax
of 35%, three different Ontario tax credits of 34.5%, plus Federal and Provincial tax deductions of
16.5%.
For investments, an option strategy is used which requires a one-time investment and can generate
30-60% each year. It uses index option is a vertical credit put spread where out-of- the- money puts
are bought and sold which expire in four months. In Canada, capital gains attract half the tax rate of
other income.