When the need for a research outcome is urgent and a successful outcem reasonably assured in the short term, it is relatively easy to decide to fund the rearch as long as the benefit/cost ratio is high enough. When the research is more strategic in nature and the outcomes more distant and less assured, then the decision to fund the research is more difficult to justify unless the perceived long term financial benefits are very large. This paper explores an lalternative way of thinking about the funding of such strategic research that uses an analogy from commodity trading. The general concept is that an R&D investement is closely analogous to an investment in an `option'. An R&D investment gives the sugar industry the right to decide, at some future date whether or not to`extercise' that R&D option.
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