Another Man's Treasure: Four Reasons To Consider Selling AG Waste For Energy

by LeClairRyan

Editor’s note: This is the second of a three-part series looking at the opportunity of biofuels and new sources farmers can provide.

The U.S. Energy Information Administration predicts tremendous growth in the use of biomass for fuel and power in the next 20 years — from less than 5 quadrillion Btu today to more than 9 quadrillion Btu by 2035. That means U.S. farmers stand to profit from a long-standing problem: ag waste. Still, the market for animal manure, trash trees, inedible grasses and the like is just getting started. Will this trend pencil out for farmers? Consider these four points:

1. Maximize Marginal Cropland
Critics of U.S. ethanol production decry the way it can cannibalize land for food crops. However, the emerging biomass market gives farmers the ability to leverage marginal farmland to grow switchgrass, miscanthus, king grass and other fibrous grasses. These perennial plants can be harvested with ordinary farm equipment. The biomass market also drives demand for otherwise-unmarketable timber (obtained via selective harvest rather than clear-cutting). Trash trees use up water, sunlight and soil nutrients. Selling them is a win-win.

2. Replace Lost Income
Growing up on a farm, I knew farmers who cultivated 100 acres of tobacco or more. But this formerly lucrative crop is on the wane. In February, CVS Caremark Corp. announced it would stop selling tobacco products in its 7,600 stores. The U.S. surgeon general just released a 980-page report calling for stricter tobacco control. Some predict the end of smoking in the U.S. While farmers have been scrambling to find replacements, including chickpeas and stevia, the answer might be something simpler: ag waste.

3. Tap Diverse Markets
Last month, we described how new energy technologies are boosting demand for all kinds of ag products and byproducts. Biogas recovery systems mean that animal manure, too, can make money for farmers. The list of buyers here is diverse and growing; already, multinationals such as Royal Dutch Shell, BP, DuPont and Chevron are teaming with tech firms to transform biomass into energy. Robust competition buoys prices. It means a raft of companies might compete for the right to locate biodigesters on a farmer’s land. The farmer’s job? Collecting on the lease.

4. Benefit from Incentives and Resources.
Concern about fossil fuels is at a fever pitch. Biomass production adds no carbon to the atmosphere. As a result, carbon credits for biomass energy will continue to spell opportunity for farmers. Indeed, the new farm bill sets aside $881 million over the next 10 years for the likes of the Biomass Crop Assistance Program, which gives money to farmers to help them produce biofuels from nonfood sources; the Biorefinery Assistance Program, which funds biofuels projects; and the Renewable Energy for America Program, which supports biomass, biogas and other alternative energy initiatives.

A parallel trend is the steady tightening of ag-waste regulations. Gone are the days when a farmer could burn waste products or endlessly dump manure on fields. Taken together, these “carrots” and “sticks” mean U.S. farmers and co-ops have ample reason to start turning their former trash into economic treasure.

Source: Farm Industry News (April 2014)

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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