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Get extra credit for your conservation practices"The potential is really quite large if you look at all of the farmable acres out there," Krog said. "It has been a sizable income for no more time than it took to do it," Holle said. By Doug Rich The benefits of no-till are well documented. It can save time, fuel, soil, moisture, and allow a producer to reduce his line of equipment. Now the emergence of carbon sequestration and the trading of carbon credits has created a side-benefit to no-till and other conservation farming practices. Merle Holle, who owns M&K Farms near Marysville, Kan., with his son, Kim, has been using no-till since the early 1990s and signed his first carbon credit contract in 2005. Holle started no-till farming on one 80-acre field they purchased in 1993. This field had a lot of hairpin terraces with varying slopes that made it difficult to farm conventionally. He started to no-till this field after attending a no-till demonstration in Gage County, Neb. Improvement "We saw the improvement on that field and increased the acreage of no-till until we now have all of our land in no-till," Holle said. There is always a learning curve with any new technology and Holle experienced this with no-till. After the third or fourth year of no-till, Holle said the soil looked like compaction was a problem. He said they were tempted to rip it up and start over. "The old-timers told us not to do anything; just leave it and it would get better," Holle said. After the fifth year, they really started to see some difference in their fields. The compaction went away. The soil had structure and was firm but there was not compaction. "It started to improve structurally and economically," Holle said. "We no-till everything now." Holle said they have been fortunate to have landowners who have been encouraging and supportive of no-till, particularly in a year like this year. This year they are behind on planting compared to conventionally tilled fields because of the cool, wet weather. The soil will stay wet and cool underneath the crop residue a little bit longer. "In a year like this when it is cool with frequent rains, we have a little trouble getting in the crop," Holle said. "We still have a good window for planting grain sorghum and soybeans." Holle said in years with adequate moisture and adequate heat units, they have not seen a big increase in yields. But, in poor years, they have better yields so their average yield has improved over time. "Crops stay healthier longer in dry weather," Holle said. He estimates that he has two to three weeks additional plant health in drought conditions. Holle said no-till is great to farm with less cost, more yield, improved environment and less labor. Now, with an established market for carbon credits, no-till farmers can get paid a little bit extra for what they are already doing on their farms. In 2003, Holle read about a carbon sequestration meeting that was being held at K-State. "I just crashed the party," Holle said. Carbon credits In 2005, he signed his first sales contract for Exchange Soil Offset (XSO) with the Iowa Farm Bureau Carbon Credit Program. Last year the Iowa Farm Bureau created a subsidiary, AgraGate Climate Credits Corporation, to handle their Carbon Credit Program. Dave Krog, CEO of AgraGate, said the Iowa Farm Bureau was the original aggregator listed on the Chicago Climate Exchange (CCX) in 2003. Now the CCX website lists over 60 approved aggregators. "We started out in Iowa and quickly spilled over into Nebraska, Kansas, and the Dakotas," Krog said. Until last year, the Iowa Carbon Credit Program was pretty much a regional effort. When AgraGate was formed, it became a national effort. Krog said they have contracts with farmers in 26 states. They started out mainly with no-till soil contracts but added rangeland contracts last year. "AgraGate has a total of 2.4 million acres under contract," Krog said. Included in that total are 600,000 acres in rangeland contracts and 50,000 acres in forestry contracts. The bulk of those acres are in no-till, strip-till, and new grass soils contracts. "The potential is really quite large if you look at all of the farmable acres out there," Krog said. Holle estimates that it takes 15 to 20 minutes per 150-acre farm to sit down, gather the data, and fill out the paperwork for a carbon credit contract. Right now they are signing up contracts for 2006 to 2010. M&K Farms has around 1,600 acres under contract. "It has been a sizable income for no more time than it took to do it," Holle said. Dave Krog said there is an enrollment process, an annual certification process that covers all contracts, and a third party verification process. The annual certification process verifies that contract holders are still doing what they enrolled to do, in terms of no-till, strip-till, or permanent grass plantings. Periodically there will be an on-site verification by a CCX approved verifier. "The only liability for the producer is that he has to do what he said he would do," Holle said. "He does not have to put up any money." There are some penalties if a producer does not follow through on his contract. If a producer defaults on his contract, he must replace credits he has been paid for through the life of the contract and he will not receive credit going forward. "The risk to the farmer is non-compliance," Krog said. "There is a good chance that the credits they have to buy are going to be more expensive than the credits they were paid for during the contract." Net proceeds Net proceeds distributions are made twice a year, in July and December. The credit is part of a pool system. Krog said they verify credits in a pool, register the pool of credit, and then sell credits out of the pool. All of the farmers with credits in the pool are treated the same. Everybody in a pool shares the same verification and registration costs. "For example, if by July 1 we have only sold 60 percent of the credits in a pool, the farmers get paid on 60 percent of their credits in that pool," Krog said. In addition, every time AgraGate registers carbon credits, 20 percent of those credits are set aside in a reserve. They still belong to the farmer and the pool they just cannot sell them until the end of the contract. "When the contract is completed, we have six months to sell those credits and pay the farmers," Krog said. Krog said they would prefer that farmers have been in no-till for a few years to show that they are committed to that style of farming and are past the learning curve. But a producer can start no-till farming the year the contract begins. The demand for carbon credits is expanding. On June 2, the Chicago Climate Futures Exchange established a new record for total daily volume in CCFE CFI futures with 1,015 contract traded (1,015000 metric tons CO2) surpassing the previous record set on May 27 when 622 contracts were traded. As of June 2, 8,330 contracts had been traded year-to-date, compared to 3,566 contracts traded in 2007. Soil carbon and rangeland offsets are issed on a per acre per year basis. The rate depends on the management practice, the location, and the status of the land. For example, producers enrolled in the soil carbon offsets program located in Illinois may be issed offsets at a rate of 0.6 metric tons of CO2 per acre per year and producers in central Kansas my be issued offsets at a rate of 0.4 metric tons CO2 per acre per year. Prices have ranged from below $1 to almost $7 per metric ton. Prices vary according to market conditions. Merle Holle has documented the benefits of no-till in his farming operation. Now, with the market for carbon credits, he can be paid a little extra for doing what he was going to do anyway. Doug Rich can be reached by phone at 785-749-5304 or by e-mail at richhpj@aol.com. 6/23/08 Date: 6/19/08
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