This Week In Ag #99

Shopping with a farmer can be quite the experience. It’s one my mother refused to partake in during her entire 40-year marriage. This weekend, I went with my wife to exchange a pair of blue jeans that Santa brought me. As we were looking for my size, a clerk at Boot Barn suggested a different brand. My wife, suspecting the inevitable, attempted to sway the conversation by mentioning that the clerk’s suggested jeans weren’t part of the sale that Santa brought. But as the sales pitch persisted, I did as all farmers quickly do. I asked for the price. When the clerk quoted us $80, the expression on my face must have resembled that of my father. I told the clerk (and according to my wife, the entire store) that cotton farmers are getting 68 cents per pound to grow cotton, and that pair of jeans contains about 1.5 pounds of the natural fabric. While the clerk and onlookers showed a look of shock and intrigue, a less-than-gentle tug from my wife cut the conversation short. But this does raise an interesting point. Do any other producers receive a shorter end of the stick than farmers and ranchers? For each gallon of gas you buy, 60% goes to the oil man. Raw materials such as steel, plastic and gas compose about half the cost of a car. Build a home, and about two-thirds of your cost goes to lumber and other building materials. But go to the grocery store, and only 15% of what you put in your cart goes to the farmer.

Nearly two out of every five rows of corn planted in the US goes to an ethanol plant. So when 2022’s Inflation Reduction Act featured a program to incentivize the production of sustainably grown grain, optimism arose for a much-needed new revenue stream. Through 45z tax credits, the IRS would offer biofuel producers significant incentives for sourcing sustainably grown grain. Biofuel producers would in-turn pass along part of the value to the growers whom they source their grain. Under the Department of Energy’s GREET (Greenhouse gases, Regulated Emissions, and Energy use in Technologies) model, the more grain you produced (higher yield), combined with the more ways you reduced carbon emissions (via production practices, the most notable being reducing the use of synthetic nitrogen), would result in a carbon intensity (CI) score. The lower your CI score, the more potential value you create. The driver behind the tax credits was to lower the carbon footprint (vis a vis energy usage) per bushel of grain produced. That’s why so many of us were left scratching our heads last week when USDA announced their highly anticipated feedstock calculator to compute grower CI scores. The revised USDA guidelines, which govern the farmer’s role, do little to meet the legislation’s original goal. The USDA model consists of six yes-or-no style questions: what is your tillage practice (no-till, minimum or conventional), do you use cover crops (yes or no), do you use a nitrogen inhibitor (as defined by AAPFC, and from which I’ve been able to ascertain, includes humic products), do you split in-season N applications, do you apply N in the fall. CI scores are calculated based on how growers answer these questions (which will be verified). There are many flaws with this approach. Crop yield is not even considered. There is no credit given for manure (to the understandable ire of livestock producers). Biologicals are not included. The model appears to put farmers in northern climates, where growing cover crops is difficult, at a disadvantage. And while the DOE model utilized a compounding effect (e.g. using multiple enhanced efficiency fertilizers) that rewarded growers to keep finding and employing ways to keep reducing their CI scores, the new model does not. But most glaring, the new USDA model does nothing to prevent the overapplication of synthetic fertilizer. Consider this: you could have two growers fill out the six questions the same way. Joe could grow 230 bu/A corn and apply 100 units of synthetic nitrogen. Jack could grow 200-bushel corn and apply 200 units of nitrogen. Yet both Joe and Jack would receive the same CI score. USDA has issued a 60-day comment period. Oh, and as of yesterday, we have a new administration, and a new USDA leader. Stay tuned.