With 40Z–the clean fuel production tax credit for transportation biofuels–set to begin on Jan. 1, Mitchell Hora, CEO of Continuum Ag, says now is the time to get your ducks in a row.
“The corn we’re harvesting now is what’s going to be utilized for this 2025 production,” he says. “We really need to have our data in order and be ready for when these tax credits do come through.”
Hora notes there are still a lot of unknowns with how the credits will work, but believes it has the potential to be a major opportunity farmers won’t want to miss out on.
“There is a significant opportunity for farmers to be compensated for their CI scores in 2024,” he says. “Now, it’s going to be messy. The data is going to be messy. The payments are likely going to be quite conservative because of that. But I still see a lot of indications as to there being some money that can be had here.”
While Hora is optimistic about the opportunities coming, Paul Neiffer, Farm CPA and host of the Top Producer podcast, is a bit more skeptical.
“The concern I have is there’s no guidance,” Neiffer says. “We have the 2024 crop, but if they come out and say the ethanol plant or the biofuel plant had to have a contract in place with the farmer, well, there’s no farmer out there that has a contract.”
Neiffer also believes the program’s success will largely come down to what the requirements end up being.
“If you have to sign up for all these regimented programs, farmers might say forget it,” Neiffer says. “If it’s four bucks a bushel, yeah, I’ll do everything for that, but if I have to do X, Y and Z for 30 or 40 cents, it’s not going to fly.”
If farmers do end up wanting to take advantage of those opportunities, however, data will be critical. According to Hora, Continuum Ag has calculated carbon intensity (CI) scores for over 325 million bushels of grain and found the average score to be 11.1 - which is 18 points lower than the default of 29.1.
“If you’re going to get paid anything, you have to have data. That’s what it boils down to,” Hora says. “If you don’t have data, that load of corn has a default load score of 29.1 until you can prove otherwise.”
He recommends taking the necessary steps now to calculate your CI score now and then implementing practices such as reduced tillage, manure application, etc. to lower it.
“Nobody knows exactly what their score is, because we don’t know exactly what the calculator is going to be. But we have a general idea of what goes into it, so we can start moving the needle,” Hora says.
While in the combine this fall and planning what practices you’ll use for next year, Hora says it’s a good time to consider how your current actions will impact your carbon intensity for next year.
“All we can do is start getting our data organized, start figuring out what the scenarios are going to be, be in position to make some educated decisions when the time is right, and capitalize however the rules do come out,” he says. “In my mind, this is just by far the biggest opportunity in ag.”
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