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Michaela Paukner:

Welcome to the No-Till Farmer podcast, brought to you by the UltraMate Lineup by The Andersons. I'm Michaela Paukner, managing Editor at No-Till Farmer. In today's episode of the podcast, I talk with No-Till veteran Guy Swanson about updates to a US tax credit that could result in a premium for no-tillers who are raising low-carbon corn for aviation fuel. Guy is an engineer at Exactrix, which is a company that makes green ammonia systems. So he's tuned into regulatory updates related to sustainability.

Guy Swanson:

Well, good morning thought maybe I could give you a little bit of help here, Michaela. This recent development by the USDA in issues of sustainable aviation fuel as a tax credit and how it aligns with the Inflation Reduction Act. And I guess I would say that as we take off on this, GREET stands for Greenhouse Gases, Regulated, Emissions and Energy use Technologies. So it's actually developed, I believe at Argon National Lab and around the country, I'm sure a lot of contribution. Well, what I'm finding is that this one is very early on to what you would expect. It's not simple. And the other piece of the puzzle is that's ideal for no-till it's ideal for cover crop and it's ideal for high-efficiency fertilizers like we build at Exactrix. We build these fertilizers on the go and we use ammonia and we use thiosulfates and zinc, which are nitrogen stabilizers and so we can do all this. We've had great results in the past in no-till cover cropping with Exactrix TAPPKTS.

So this is going on and I think I could pinpoint right now about 4 million bushels of corn that would be available this year in Nebraska and Western Kansas that can meet the criteria. So any commentary that would indicate that nobody can do this, well, it's going on in these areas. Irrigated and dryland production, Nebraska, Kansas and parts of Colorado on down into Texas, Pampa, Texas, et cetera. So this is a Great Plains type play that we could do. There's some challenges in this and of course, and identity preserved and building a pathway. We can apply those nutrients well below 50% total rates of MPKS and zinc that's below the university recommendations. That's not a problem. We'll need to start on western Kansas, dryland and irrigated and irrigated Nebraska, that's probably one of the best places to get it done. We probably need to go to specific ethanol plants that want to make this happen.

Probably those that see very little future in the CO₂ pipeline, that's probably a driver. And I also believe there's one ethanol plant in Kansas that also co-processes with a starch plant at Russell, Kansas and they may qualify. You can make the subject complicated or simple. Simple sells fast, when the economics are a lot better than proposed. It's very gray. Maybe we ought to try a little bit different incentive program. I think that was one of the things I first saw. And we have talked about it with university people in Nebraska, about the possibility of offering an IP product at about a buck 50 a bushel that would go to the ethanol plant and if you could prove up your carbon inputs and et cetera, you could get that premium. That might work pretty good. If you make it complicated people, they just don't have a taste for it.

So in general, a lot of the machinery does exist. You can move into it. I see several benefits from not only ethanol but the byproduct distillers' grain and we can make some inroads into IP identity of the cattle. Of course that all exists; that's the story of the cattle industry, as we produce some of the best beef in the world. And as those reports from last week indicated, our cuts came in the testing labs and were virus free and healthy beef is being produced. So we do have a way to get that methane belch removed from fossil sources of energy to raise a cow and I think that's the other little benefit. I want to tell you right now. Let's let the farmer get creative. Do not restrict his imagination. If you give him enough financial incentive, he will do it. And it's very similar to what has happened in wartime where farmers have big incentives to produce. If we're in a war with carbon, we need to implement some of the best tactics we can.

Michaela Paukner:

So you said that potentially there could be a $1.50, a bushel premium if the farmer could prove that they're using these sustainable practices. How would they go about proving that?

Guy Swanson:

Well, this is going on today in the western areas of the states where we do Identity Preserved, an IP program. We actually prove up the identity of the grain that's being produced. It's called Shepherd's Grain and Identity Preserved is absolutely the way they get that grain out of the field and are able to promote [inaudible 00:06:13] as advertised that it's sustainable, that the grain was raised with reduced rates and nutrients that was no-till implemented. Also, I think the biggest thing is that there is a little cover crop in there. And so this is actually going on and one of my good customers at Genesee, Idaho is Eric Goldberg and he is a prime example of getting a premium price for raising grain. And it's because the customer, the ultimate consumer, demands high quality. Not every consumer does, but it's not organic. It allows continuous no tilling over the land and he only has one seeder and he's got one sprayer and he's got ammonia equipment on board and he hillside farms with a big, big tractor from I think either Case and he can also use Deere tractors to get the job done.

So for high horsepower, it's a great place to go. Those tractors will eventually be running on ammonia, ethanol or some combination thereof as we begin to progress. So it's important to keep in mind that you give the farmer a chance, you give him a price, and he'll do it for you and you'll do it faster than any other industry can do it. And that's what we see in transportation, in getting the carbon out of the atmosphere. We've got to make some changes and it's going to take 20 years to get it done. Right now the farmers can do it in just a wink of an eye. They can say, "Okay son, let's go do it. We'll prove to the world that's a good money project. We're going to raise a specialty crop. It's going to be corn. We're going to use a lot of our same inputs in machinery, but we're going to do a much better job than our neighbor."

Michaela Paukner:

So is Shepard's Grain going out to the different producers and verifying that they're doing no-till and cover crops and being efficient with fertilizer?

Guy Swanson:

Well, it's actually well beyond that. Shepard's Grain actually has field certification and so they have visitations to confirm that and they have record keeping that they turn in. And they also have producers that built this organization and they presently mill their grain in, I believe, Blackfoot, Idaho. And they've worked with big firms like ADM in the past. They've gone to smaller mills, Pendleton Mills as well as this in Blackfoot Idaho. I don't know the exact name of them. But anyway, that's how they market Shepherd's Grain. And so they can prove it up with documentation. They cross verify the carbon content in the soil and are constantly watching that. They're very concerned about their no tillage operations. They try to stay out of it totally. And so you can do that in certain scenarios. Now, that's not to say this is for everybody. Once again, this sustainable program, they're going to have to put a lot of money into it to make it really come true for SAF.

And I think this is the real part of the mystery. I don't think they have a clue what it takes to move the gyro. Everybody's running on a gyro and they don't want to go left or right. They just want to go straight ahead and we have got to move the gyro in a little bit of different direction to make this happen and it's going to take a lot more than what they're thinking for cash flow. So in general, if you go across the Great Plains, a lot of producers just don't have the equipment. The fertilizer dealers are going to work against it, or fertilizer industry, are going to work against it because it's a reduction in the use of nitrogen, potassium, phosphates and sulfur. They don't want to see that reduction. They want to go through the pivot. They want to use Solution 32. They want to use techniques that are simple, easy to do; it's called salvage and convenience.

And in our particular system, you have to plan ahead. You need to lay out a game plan for getting those nutrients in the deck away from the atmosphere so we don't get nitrous oxide going. And of course, the other one is methane and that's why we no-till. We want to get that diesel fuel content down as low as possible and I think that's another core measurement that they really missed. In this document that they proposed, this GREET document, that you can simply use diesel fuel as the amount of diesel fuel consumed per acre and depends on machine width, et cetera, et cetera. But these guys get really efficient if they're no-tilling. They're down to a gallon gallon a half an acre before the combine hits it. So Frank and I have talked about this many times and it's a six factor. Six times the cost of your diesel fuel is about what the tillage system ends up having a disadvantage of.

So if your total cost is around $24 an acre, you multiply that times six and you find out real quick, "Man, that's $120 that I don't have that advantage," and no-till has this advantage. I think if you give the producer the incentive of diesel fuel consumption, all this will go away. You don't have to do all this scientific stuff. You just look how much is going in the fuel tank and then you'll begin to understand. Hey, that's how you prove it. We're doing our best efforts out here. And so, okay, and so it's not a tax on diesel fuel; it becomes a benefit of reducing diesel fuel with economic incentive. That's a real bottom line way to look at it. And let's use placement. Let's get those nutrients in the deck whether you're irrigated or dry land, it doesn't matter. Get it in the ground. Don't let it run off, get up in the atmosphere, convert, get down the drinking water. It's just, we have systems that do exist. We can do this.

Michaela Paukner:

At this point in the conversation, Guy starts talking through some of the specifics from the IRS about the sustainable aviation fuel credits. Hear his comments about the no-till and cover crop requirements.

Guy Swanson:

I want to go to the section, what they're advocating and no-till farming defined. Let's do it by diesel fuel. Let's just simply do it by diesel fuel and then we'll have a winner. There's just a lot of different ways to farm and the fuel input is the most common way to measure your efficiency. So that's under the no-till farming defined cover crop practices, totally in favor of it. Rye, winter peas and others that we use in fumigation, we like fumigate-grade mustard that works in Kansas conditions and in Nebraska conditions. We sometimes relay it in. And I would like to see maybe some more Winter Rape in the cycle, Winter Canola, and of course, good old rye that has been working so well following the NRCS guidelines.

Michaela Paukner:

The IRS notice also outlines Enhanced Efficiency Nitrogen Fertilizer or EENF practices for corn. There are three strategies provided, but the notice says EENF must make up at least 50% of the nitrogen source.

Guy Swanson:

They're asking us to do something that's almost mission impossible. And in order for you to do this, you have to a continuous no-tiller. You need to use rotational band loading like we use in Garden City, Kansas and we can produce record yields and very little fertilizer input as long as those deep bands stay in place and those future crops get to access some of that stabilized MPKS that's in those bands. And when you crystallize those materials and with high pressure injection of ammonia, then you make it work.

So we discovered that this recently. There's been an article that's gone out several times and explains it. And so, I want farmers to realize that if you work at it long enough, you're going to realize that fertilizer if it's placed, is there for future crops. And so it's a nominal rate that we use in dryland corn is around 70 pounds in and a typical phosphate rate would be 10 pounds of P, 10 pounds of K, and 10 pounds of sulfur, with a little bit of zinc. And then that stabilizes the bands so they don't move around and whatever's left over is for the next crop. So this continuous cropping works very good.

Michaela Paukner:

Under the enhanced efficiency nitrogen fertilizer practices, it says, "For corn strategies include using nitrification inhibitors, urease inhibitors, or slow release fertilizers for a minimum of 50% of nitrogen applications."

Guy Swanson:

Yes.

Michaela Paukner:

So is this where they're talking about you would have to cut down to 50% or they're just saying 50% of your nitrogen needs to be this efficient?

Guy Swanson:

Well, this is somewhat of a fuzzy mistake that they left in there. They didn't use the university recommendation. They just said, "Well, 50% of what you're doing now." Is that what they said? We don't know what they really mean by that, but I can tell you that it's doable. You can apply at much lower rates but to say, "Oh, it's 50%," that's kind of grabby because you can't use that. It's just a general comment.

It's just that you can reduce your use of nutrients, but it's a swipe at the fertilizer industry. These people work hard, too, and they have inventory and you cannot deny that commercial fertilizer has gotten us where we're at today. It's just that we have misused it in many cases now and it's time to take a look at the better approaches to get the job done and get it banded into the soil. Quit putting it over the top. Get it in the ground. All our great scientists in the eighties and the nineties in the three Pacific Northwestern states discovered that fertilizer placement was absolutely key in making no-till work. And we know that's the case in Kansas and Nebraska. If it's in the ground, it's going to go to work.

Michaela Paukner:

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Next up, Guy addresses the notices' requirement that farmers need to maintain similar records for cover crops as they do for cash crops and keep management records about their nitrogen use.

Guy Swanson:

We do need to do some cross-verification from time to time to see if we are improving the carbon in the soil. It's not a mandatory make or break situation. Carbon building is based on rainfall and the ability of the soil to produce the cation exchange capacity, et cetera, and so you can't expect new equilibrium to be reached just overnight. But we have great scientists that can tell you all about that. As far as SAF producer requirements, I think strip-till is an excellent way to get started; you can also move into no-till. This project will allow strip-till. You need to probably take another side of this thing and understand that there may have to be some tillage implemented in order to take out tractor tracks or mudding conditions, et cetera.

So there are years where you have to give up some of that gain that you made and you have to level the ground or do some things that would maybe counsel and advise the crop to do a little better by leveling the ground. And that's high-speed planters do better when they have a nice level platform to work on. It comes down to record keeping and compliance and all that's doable. We're already doing it and I think in the future, we need a lot of clarity on this. We need a lot of help and some good advice that fits the fertilizer people, fits the energy people.

It seems like we're doing a disfavor to a lot of industries by cutting fertilizer, reducing fertilizer to 50% and reducing fossil fuel use in the engine but I don't know how else you do it. You got to get rid of the energy that's tearing up the soil that's in all the carbon that gets up in the atmosphere where we can sink it back into the big bathtub and store that. And agriculture's got the key. They have it. They've got the land mass. They've got the 400 million acres including some pasture land or I think it's 381. I was just double checking that.

But we have about two to 300 million that really this fits and of that, maybe there's only like 5% they'll ever do this, get started, but those 5% are already doing it. I think they will see this as a way to promote their outlook on how to raise crops. We've still got fertilizer. We've still got weed control. We've still got rotation. There's great benefits in reducing GHD.

So the GREET model, I know there's some really dedicated scientists and people that spend all day long doing calculations and trying to figure out how to do it, but believe me, we're out here. We're on the land. We know what works. We're engineers. We know how to make it work, and I want to pass some of this information over to my cohorts at the University of Nebraska and Kansas State University. I think they have been outstanding in support for bringing no-till to the forefront and let's not give no-till a bad eye on this. They just need to adjust, make changes, make it work a little better.

Michaela Paukner:

Great. And then going back to the credit that's being talked about right now for the SAF and it's saying $1.25 per gallon for SAF that achieves at least a 50% reduction in greenhouse gas emissions with additional incentives capped at a $1.75 per gallon. These are the numbers that are set in stone or is this all still kind of up in the air about what this is going to look like?

Guy Swanson:

Well, I would say that it's a chance to say these are admirable goals. These are goals. These are not practical goals and we need to give the producer the chance to perform. It's kind of like having a bowl. You don't know if you got a good one until about two years later. We have got to give these guys a little elbow room, a little time, a little elasticity in their management style and then, if they have these incentives, they'll figure it out. They'll actually get it figured out.

But for right now, you can see why there's been a lot of controversy raised about it and it is truly a no-till project. I mean, you got to be a no-tiller to do this and if you no-till and you use some cover cropping and if you improve your carbon score and use Exactrix equipment, it's like I wrote the dang thing. But I can tell you it's a heart-driven vision of the future that we have and we can do it. We can do it. I want to clean up as much as we can and less is always more. We know that. Less is more and all the test plot work we've done over the years, it's always the low rate that wins the economic game.

So we just pushed it into thinking that those white tanks were the only way that we could get yields. They thought all the yield was in the white tank. All fertilizer is, is just a stimulant. It's way over promoted as a plant food or a soil builder or anything like that. It's just simply a stimulant. And once we let Mother Nature take over, we get the biological process going, we get good rainfall, we get everything else going for us. Boy, that's when you really punch it out, man. That's good stuff. And that's why we like to work under center pivots because we take out that rainfall variable and we're able to really implement some very good results.

I've had a lot of producers come up to me and say, "Oh, Guy, I never told you about this, but that field over there on such-and-such road? We raised a record yield over there."

And then it'll be two years later, I'll get a phone call and some guy said, "Well Guy, I hit 299 bushel average," and well you know, I didn't hear that. I heard 199.

I hung up the phone, called him back and said, "Did you say 299?"

He said, "Yep, 299."

And that's when we controlled the nematodes and used a lot of special techniques and fertility placement including KTS and TAPPKTS, that broke through. So these situations are totally solvable. They are totally solvable. If we can just get these young guys to realize, "Well, we probably made a few mistakes in the past, dad, but there is some new technology and I would want to work with you, dad, you got the checkbook, but let's see if we can't get more efficient. Let's see how efficient we can get."

And then you can compete and you can buy land or buy an apartment house or do things, but it's about the margin. You've got to get the margin right first.

Michaela Paukner:

Just going back on the actual incentive because I know that the way this is written, they're talking about it in price per gallon of fuel. So how does that then translate to the farmer in raising bushels of corn? How is that going to then be fairly distributed between the ethanol producer and the farmer?

Guy Swanson:

Well, once again, there's 2.55 gallons of ethanol that comes from a bushel of corn and there's also distillers grains, a pretty significant amount that ends up in the cow's belly. So there's two products we're producing and most likely that secret lies with an incentive for the producer, a growers' organization that's connected into the ethanol plant and they don't really have to go so deeply into the ethanol pockets. The ethanol producer wants to buy the corn and he wants to buy it at possibly a premium so that he can get, that's about $4.75 of benefit from a bushel that's 2.55 times that $1.75 and he's getting that benefit. Well, maybe that's what it takes for a high promotion, but let's give the farmer a little bit of different approach instead of this complicated scientific design. Let's give him an award for reducing use of diesel fuel, reducing use of fertilizer inputs, maybe 50% of what he previously did, and we can reduce the use of the ammonia tremendously from the university recommendation by simply no-tilling and following some of these practices we've been able to develop.

One of my good scientists buddies ran the ARS in Pullman, USDA Agricultural Research Service, Robert Papendick, and he said, "Guy, I feel like I'm a voice crying in the wilderness." Well, that was the early years and we were able to make it producer driven. No-till became producer driven. It's not a phenomena of scientific discovery. It is a phenomena of producers looking for a better bottom line and saving soil and I think that's the best way to look at your future is the soil. It's going to spin us into some more better opportunities economically. Don't forget agriculture is the greatest carbon sink that's available to us right now. It's available right now. We don't have to do carbon capture. We're going to carbon capture, so to speak, by just stopping the tillage.

Michaela Paukner:

Exactly. So in terms of what's ahead for this, are these guidelines going through some kind of review process and when might they take effect? What does that look like?

Guy Swanson:

I believe the guidelines are being reviewed. I think I read in the Lincoln paper, one of my good friends reported to me that Deb Fischer's office, Senator Fischer, is looking for a review of this so-called GREET model.

Michaela Paukner:

Okay.

Guy Swanson:

So boy, I'll tell you what. It stirred the pot, though. We really have a lot of people that spoke out about it once they understood it but don't discount no-till. I saw a report from Minnesota that said there's no scientific proof that no-till improves the carbon in the soil. Well, I don't think he knows diddly. When you stop the tillage, you're not putting the poker in the fire anymore. You take out the poker, you quit oxygenating it, and then you have an opportunity to build soil carbon.

All that's well known across the Great Plains. All this is great scientific basis to move to no-till, get that residue on top of the deck and protect the emerging crop from the wind and the tough hail and all the tough weather we're going through right now in the Great Plains. No-tillers have the advantage because they don't have near as much risk in a growing crop and the soil doesn't blow and you're not putting greenhouse gas up in the atmosphere. The nitrous oxide is an Achilles heel of American agriculture and I think we contribute 62% of all the nitrous oxide is coming from the soil fertilizer, topdress fertilizer, and we've got to get it turned around the other way.

Michaela Paukner:

I have one more question then if you want to have any other comments you want to add. Just talking about, we've reported on the 45Z Tax Credit that is coming and how does what we're talking about today with the GREET model relate to that 45Z Tax Credit?

Guy Swanson:

Well, the 45Z, for those that are not exposed to these numbers and letters, are written primarily for specific industries. And this is Ethanol's little corner in the IRA; it's called the 45Z. 45Z is often discussed but remember this GREET model is... There's other models that do exist and even though they're quoting from GREET, that's kind of a scientific Argon Labs report and they're trying to do their best effort just to look at the carbon, but there's a compromise here. You can see that we have to go talk to the real world to make this work.

And so, let's get in a room here with all the best no-till farmers with a lot of acres and a lot of machinery that can no-till. Let's get in that room and let's talk to them and see what they have to say. And then, you're looking for the path of least resistance. You want to find out, "How do I get this into place and carve out a future road for our no-till farmers?" And I think you'll find it. The method is inside the madness of compromise and the GREET model is not practical. I think that's a simple way to say it. The GREET model is not practical.

And a final point, make it simple. Make it not totally answerable to a GREET model. Just get it started. Get it started and then inch into it. Give a transitional type period where people can do this because it is, for the lump sum of the economy, it's difficult of the AG economy. It's difficult to make change and so there's a lot of incentives that need to be laid out there. And I think it's probably just pay a better price for the corn. Try to measure it by the diesel fuel, how much you're consuming, and then measure it by the amount of nutrients you use. All nutrients, it's not just nitrogen. It's NPKS. And then you begin to understand, "Okay, it's a little more than nitrogen, it's about all these other nutrients too, because they take energy." And we've got to get those reduced and more efficient and banding in proximity with the rows is really key.

Okay, one more final point. I was thinking, "Well, what would a creative producer do in Western Kansas? Would he go to a continuous corn with a 60-inch row spacing and would he band NPKS and no-till directly within five inches of the cornrow? And would he consider a two-year legume like clover? Would he plant that between those 60-inch corn rows, maybe one or two 10-inch rows or a 15-inch row, just to give a little zone to produce some nitrogen and then he could go every second year slip over and pick up that dead band area, that legume area? Would he be able to run cows on that? Would he be able to raise a grass in that area and run cattle?" So it's like Australia; it's a true lay rotation where you use livestock to help you boost your profitability. But once again-

Michaela Paukner:

Yeah, that's a good way to put it, creative producer. Just thinking about this, instead of being limiting how it could provide new opportunities for profitability.

Guy Swanson:

Yeah, yeah. It's so difficult to get all the soldiers to march together. And so, I think what they're thinking in the GREET model, is they're trying to get all these soldiers to march together, and that's not accomplished easily. That's very difficult. So give them some elbow room, let them work with it, try to figure it out. And make sure the ethanol plant makes money, make sure the producer makes money, good money, and then they'll go.

Michaela Paukner:

Listeners of the No-Till Farmer podcast may remember an interview that editor Frank Lessiter did with no-tiller Mitchell Hora, whose company developed a model to calculate a farm's carbon intensity score. Mitchell envisions a future where the score translates to no-tillers receiving part of the 45Z tax credit. We have a link to that episode of the podcast, plus additional articles about the new GREET model update at No-TillFarmer.com/Podcast.

Many thanks to Guy Swanson for today's conversation and to the UltraMate line-up by The Andersons for helping to make this No-Till podcast series possible. From all of us here at No-Till Farmer, I'm Michaela Paukner. Thanks for listening.