(bright music) - Hello and welcome to "Farm Connections."

I'm your host, Dan Hoffman.

On today's episode, we meet with crop marketing expert, Don Burns, to discuss market trends and programs that will affect farmers in the near future.

Tyler Schwarck from Absolute Energy talks about what Absolute Energy is all about, and the University of Minnesota Extension provides us a new Best Practices.

All here today on "Farm Connections."

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- Welcome to "Farm Connections."

We traveled to Owatonna, Minnesota for a workshop on carbon intensity, and with me is Don Burns from the Absolute Energy plant in Mona and Lyle, a crop marketing expert, and we'd like to welcome you to "Farm Connections."

- Thanks, Dan.

- What a great workshop, and you gave a great presentation on some of the things you do.

Can you just kinda recap it for us?

- Sure, well, I started off in the ethanol industry about 15 years ago, and starting up Absolute Energy down by Lyle, Minnesota.

I've been in the green business for 50 years.

The year I entered it was in 1974.

We had 40-pound test weight, 40% moisture, and 40% FM corn that year, and we had, since then, we've gone through so many different various farm programs, CRPs, government storage programs, set-aside programs, all because we really didn't have a market for the amount of corn we produced.

And then along come the ethanol industry, and for the first time, the farmer could earn an income from the marketplace and not from the government.

And since then, our biggest problem is we haven't been able to grow the ethanol demand as much as corn production has increased.

We had a few setbacks due to Mother Nature, but that's the only reason why we haven't been growing our carryout, and we are going to.

So we come to today, and now we're looking at ways of expanding the ethanol business model, and right now, the growth is in low-carbon ethanol to be used for SAF fuel, sustainable aviation fuel, and today's meeting was one step where the farmer now is finding out what he has to do to be able to make this market feasible.

- That's a nice recap, and Don, much of our audience won't know about 40/40/40, but when I hear 40% foreign material, I think that's pretty junky.

There's a lot of chaff, there's other things in there besides just grain.

I hear 40% moisture, I think extreme drying costs, hard to store, what do we do with this stuff?

And then when I hear about 40 test weight, we need 56 pounds in it to be at a standard US number two grain corn, right?

- Right.

- So 40 is a huge discount, so we got stress, right?

We got stress in the market.

What do we do with this grain?

You talked about ethanol, and of course, we know that that's come about because farmers and other industry leaders came together and said, "Hey, let's do something about smoggy, dirty air."

When you talked about carryout, what are you talking about?

- Well, carryout, you know, at the end of the year, we got so many bushels left in the bin, and the price of corn is directly related to how many bushels are left in the bin at the end of the marking year.

If we can be under 1.5 billion bushels, you know, we're looking at a price about $1.50 higher than we are today, but if we're looking at a carryout of three billion bushels, price projections are gonna be probably a dollar lower than we have at our, actually are today, and I don't know one farmer this spring that doesn't plant an acre of corn where he's not planting 200 bushel corn.

That's his goal, maybe 250.

So we've got to, and as the farmer keeps getting better and better and better, we gotta keep expanding his market.

And we've been capped at about a 10% inclusion rate into the fuel market since the RFS come out.

In fact, in 2022, after 20 years, we're only at 10.6% inclusion rate.

We have not gained much in the market.

So we've gotta look at other markets to ship ethanol to to expand, to help use up this production potential that is gonna happen.

Someday, we're gonna hit a trifecta, and we're gonna have a three-plus-billion bushel carryout, and we're gonna have it for several years.

So the marketplace is saying we want carbon-intensity-score-low corn to make into a fuel for jet airplanes, called sustainable aviation fuel.

That is the big market out there.

The airline industry wants it because their board of directors see the reason to go that way.

It's being driven by both capital and by environmentalists, whether we agree to it or not, really doesn't matter.

It's all about business, producing a product that the consumer wants and willing to pay for, and that's where today's meeting is one of the first steps of educating the farmer about how to make that product that the consumer wants.

- Now, when you talk about carryout and surplus, I understand that suppresses the market, but as a person that loves to eat, I always want one more bushel in the granary, one more bushel.

So we need to have farmers that produce a lot, otherwise, we don't have choices, or if we have low quality some year, correct?

- [Don] Correct.

- [Dan] And sometimes our consumers say, "You know what, why are we using corn for fuel instead of food, but, really, there's some things about that that are okay, right?

- Right, you know, it's an educational thing.

First thing people think of with corn is they think of sweet corn 'cause that's what they eat.

The number of acres of sweet corn is relatively small because we don't consume that much.

We're not using sweet corn to make ethanol.

There was a, in Iowa, we have what they call Field of Dreams, and two years ago, they had the first National League baseball game at the Field of Dreams.

And the players come running out of the cornfield.

You know, two players from New York stopped, peeled back the husk, took the ear of corn, and bit into it, and spit it out and threw the corn, threw it back in the cornfield on national TV.

We don't eat the corn we use for ethanol.

We, indirectly, we do because we make several different co-products out of that corn.

In the process, of course, we make ethanol, which takes 1/3 of the bushel.

We make DDGs, which is 1/3 of the bushel.

And then we also make corn oil, and the DDGs goes into feeding beef, pork, dairy guys use it in their ration.

It is a very valuable source of protein for livestock.

We're seeing, in our area, feedlots coming back to Iowa and Minnesota because of DDGs.

It is a ruminant bypass protein, which is second to none for feeding cattle.

We're seeing producers up to four pounds a day of gain in beef cattle, who are on our product.

We call it a modified distillers' grain product.

So they're able to be competitive with the big feedlots of Texas.

And that's been one of the side benefits of the ethanol industry.

Pork industry loves it.

It helps both be a corn product for their ration, which extends their corn.

It's also a protein source, so it also helps lower the amount of soybean meal they need to add.

So the ethanol is not actually decreasing food we eat, it's actually increasing.

- Great points, and you talked about RFS or renewable fuel standards.

With all these good things that can come from a biofuel like ethanol, why are we only at 10% or slightly above in inclusion with our other petroleum-based products?

- Well, the only way we can get the ethanol to the consumer is through an oil company 'cause he blends it with these gasoline to be an oxygenator.

Without it, your engine would knock.

- [Dan] The oxygenator, meaning ethanol?

- Ethanol, yeah.

Without it, it would not, back in the '70s, when we were running around, buying our first car at age 16, we'd pull up to the pump, and you'd see sign that says, "Contain lead."

That was the additive to keep the engine from knocking.

Well, they found out what lead did, and so they discontinued using lead.

The oil industry said, "Wow, we got a replacement called MBT," which they started putting into the gasoline.

Well, all of a sudden, we found out that that was a carcinogenic, water-soluble carcinogenic.

And it got into the groundwater, especially in areas where it's sandy ground.

Madison, Wisconsin was one of the first to find out about it.

That speared the drive to find a replacement, and ethanol was, industry was this, reincarnated.

- Certainly, some great benefits to ethanol, especially to places that are lucky enough to grow corn and have ethanol plants, a huge tax base, both real estate and also from workers, their W-2s, for example.

Today was about something called carbon intensity.

So, I'm thinking you, and you certainly showed it today, your company used some leadership, some forethought on what could possibly happen.

What's your vision?

- Well, the vision is, you know, continually working towards a better environment, and putting a value on it.

That's where emotion and politics get involved, but the bottom line is, you know, we need a national energy policy.

We need to make the decision about air quality, where we're going to drive our energy sources going forward.

You know, we do not have, we're not manufacturing any oil today.

We're not manufacturing any more natural gas today.

Once we pull that out of the ground, it's not being remanufactured, where ethanol and many of the other biofuels are all renewable.

We produce a crop every year, and it's something that, if you look at the long term, is how society will survive, you know, two, three, 400,000 years from today.

Oil and gas is gonna be gone at some point, or it'll be too high price even to get.

You know, granted, we need some of it for some purposes, but, you know, the direction of designing a energy program that's based on renewable is the right direction to go.

- Great points, and when you add carbon to it or some kind of incentive for the farmers, it makes it even better.

- Well, that's the other benefit to a renewable energy program is by combining cultural practices that farmers, or some of 'em are already doing, we can also then sequester the carbon.

Whether or not, again, that gets back to personal opinions, but from a plant point of view, it loves carbon.

So anything that helps increase carbon in the soil is gonna help the plant, help generate better yields, produce more renewable energy, and we've completed a cycle that can be carried on for as long as we want.

- Well, I'm certainly hearing the advantages to our air quality and ground quality, but also when you put the carbon part in there and incentivize farmers to do the right thing for conservation for the soil, isn't that helping our waterways stay cleaner, our ditches stay cleaner, our snow banks stay cleaner?

- Well, yes, because as they mentioned in the meeting, if we can stabilize the soil, have a root structure from various types of plants that help stabilize the N, P, and K we're putting out here, that'll help clean up our streams and add benefit to all humanity.

Where the American farmer has probably been maybe characterized in the wrong way versus today's American farmer, we're changing fast, and one of the conversations is the collection of data, today's meeting, is to collect the data to prove that we are farming better than we were 10 years ago and having reduced environment impacts than we were 10 years ago, so then the energy source that we're gonna produce is better than an oil-based, fossil fuel society we got today.

- So if we do the right things, collect the data, and it shows the correct things, what's the outcome?

- Well, the outcome is, is being able to put a national energy policy together that gets to the goals that we want to achieve, cleaner air, cleaner water, safe food, safe energy, and an energy source that will be here for generations to come.

- It was a great meeting, and I love the comments you gave today, very knowledgeable.

- Thank you.

- Stay tuned for more on "Farm Connections."

(upbeat music) - [Announcer] "Farm Connections Best Practices," brought to you by Absolute Energy and AgVantage Software.

(upbeat music) - Hi, I am Liz Stahl, extension educator in crops with the University of Minnesota Extension.

And for today's Best Practices segment, I'm gonna talk about cover crop termination.

Now if you're planning a cover crop, and you're planning to have a cash crop after that cover crop, effective termination is really key to help make sure that you don't have that cash, or excuse me, that cover crop compete with your cash crop 'cause it can compete for light, nutrients, water, and again, ultimately affecting yield, which again, is something that you don't want to happen when you're planning a cover crop.

So, again, effective termination is key.

Well, University of Minnesota researchers, we've done some different research, looking at different herbicide options for cover crop termination and also some mechanical options.

Now when we look at the herbicide trials that we've done, all those treatments that had glyphosate, that's the active ingredient in Roundup, for example, those are the most effective at terminating a cover crop.

Now, it's important to note that we did use a full rate of glyphosate in these treatments.

Why I mention that is because we know that glyphosate, for example, works best when you have day temperatures above 60 degrees, and then your nighttime temperatures don't drop below 40 degrees.

It's pretty tough to get that in the spring here in Minnesota, so to help compensate for that, that's why we looked at those full-labeled rates of glyphosate, but again, those are the most consistent at terminating our cover crop, and I should note too that we were looking at cereal rye cover crop.

Now, one of the herbicides that we looked at was Liberty.

That active ingredient is glufosinate.

That's a great herbicide to use, but we would not recommend using that to terminate a cover crop early in the season.

Key reason being, for that product, it's most effective when you have sunny days, warm temperatures, higher relative humidity, and it's really tough to get that combination when you're terminating a cover crop early on in the spring.

So again, save that product till later on in the season for post-emergents.

It would be really tough to use that early on in the season to get effective control of your cover crop.

Now for the mechanical options that we looked at, we evaluated mowing, that was not as effective as a herbicide for termination.

We also looked at tillage.

We had to do that a couple times.

We still didn't get as effective termination either with the cover crop.

And you also gotta think, if you're tilling that cover crop, are you wiping out some of those soil health benefits too?

So that's something to think about.

One mechanical option we did not look at in our trials, but we've, you know, looked at in the past and gotten information from other people and other researchers, would be roller crimping of a cover crop.

Now there's only certain species that you can actually terminate with roller crimpers.

Cereal rye would be one of those.

You wanna make sure, timing is very important with that.

It has to be heading on in the pollen shedding, so we call that anthesis, but even if you do get the timing right, still has not been as consistent control that we see as we would with a herbicide, but, you know, if you're an organic grower, you can't use a herbicide, so this would be an option for that, but again, overall hasn't been as consistent as we'd see with a herbicide, but anyway, this is Liz Stahl, extension educator in crops with the University of Minnesota Extension, talking about cover crop options, and thank you for watching.

- Welcome to "Farm Connections."

We're in Austin, Minnesota at the Hormel Institute, and with me today is Tyler Schwarck from the Absolute Energy.

- Thank you for having me, very much, Dan, I appreciate it.

- You're welcome.

Tyler, what do you produce at Absolute Energy?

- We have three main products.

We have ethanol, we have dried distillers' grains, and we have corn oil.

- Awesome, and what's dried distillers' grain?

- That is what's left of the corn kernel after we remove the starch, which is converted to ethanol.

So the fat, the fiber, the protein is all left and is animal feed.

- Well, I noticed from your title on your card, you're the interim CEO of the company.

- Yes, I am.

I've been with the company since inception back in 2007, and I'll be taking over for Rick Schwarck at his retirement at the end of the year.

- Nice transition.

- [Tyler] Thank you.

- Leadership's very important, and one of the nice things about ethanol is it really gives back to our community.

- [Tyler] It does.

- Tell me some of the things you've seen given back to the community.

- Well, we're a farmer-owned ethanol facility.

We have approximately 470 members, most of which are farmers that live within about 50 miles of our plant.

So, as we make money, they make money.

So we pay out annual distributions that goes to our local farmers.

They spend it within the local community, and it's been a very good fit for us.

- And not to mention, there's probably some W-2 taxes and some property taxes that get paid.

- Oh, yes, there's a lot of taxes that get paid out, so.

- It's no small operation, so do you use other vendors, contractors to build and repair?

- Yes, we have a whole slew of vendors.

I would say, on average, we probably have two to 300 different contractors working at our facility at various points throughout the year.

We have major shutdowns in the spring and the fall.

We do all of our repairs and maintenance 'cause we're a 24-hour facility.

So, in the spring and the fall, we shut the plant down, do all those repairs and maintenance, and it is a busy place.

We employ a lot of people, both directly and indirectly.

- Well, the tolerance level isn't very wide for things like, things that would interfere with ethanol production, when you've got microorganisms in tanks.

Tell us about some of the things you do to test and make sure that everything goes as planned.

- We have a full quality control lab at Absolute Energy, state-of-the-art equipment.

We are, every hour to two hours, we're testing our ethanol, our corn oil, our distillers' grains, making sure we're there with, excuse me, within spec, but yes, microorganisms are a big part, making sure we don't have infections or anything like that, so we have a clean, healthy process, so it's constantly monitored.

- Tyler, there's other sources of energy besides gasoline or ethanol.

How does ethanol line up with those and bring us advantages?

- Well, I'd say most all sources of energy are needed, but ethanol is here, we're available today, and we're ready to go to work to meet the goals for reducing carbon because everything is carbon-related, everybody wants lower carbon fuel.

Ethanol is that, and we're here today, and we're happy to help, so.

- What's the greatest joy you found going to work as CEO?

- Well, I guess a little backstory.

I'm from the county in which we're located.

I was born and raised here, moved back after college, so I got to move back home, be close to family, friends, coworkers.

We're more of a family-oriented-type business.

We're all friends there.

- So you're a good example of brain drain going the opposite direction, and in a good way, brain power coming back to our local rural communities.

Thank you for doing that, Tyler.

- Yes, thank you.

- That's probably one good reason to go to work and try and keep that place going well.

- Yes, it is, yep, you work hard and good things will come, so.

- You probably have met with your board and talked about some strategic planning, and obviously, you can't share trade secrets, but as we look towards the future, what can we expect from Absolute Energy?

- Hopefully, more of the same.

We're gonna continue to look at our carbon intensity.

We look at that weekly, and we're currently pursuing several technologies that we're looking at to further reduce our carbon intensity score because we need to, in order to compete in the energy market, we need to lower our CI score.

We've been doing that for years.

We're trying to couple with the farmers now to help on the farming practice side of things because approximately half of the CI score from ethanol comes from the farming, okay?

So in order for, to reduce that farming practice CI score any more, we're trying to engage with the farmers, which is the point of the meeting here today, to incentivize them to adopt lower CI score farming practices, like cover crops, nutrient management, and reduced tillage.

- It's beginning to sound like this program is good for the ethanol plant, but also good for farmers.

How do you hope this partnership helps each other?

- Well, many of the ethanol markets are being driven for a lower CI score.

So, by coupling with the farmers to get a lower-CI corn, that reduces the ethanol plants' carbon intensity and that offers more market opportunities for the ethanol plants.

So, it's kind of a, comes full circle, wells to wheels, but that's kind of what we're going for.

- Awesome, so if we can get more for a gallon of ethanol in the retail or wholesale market, perhaps you're willing to share or need to share?

- Yes, yes, so the whole point of this, besides creating more market share for ethanol, is we're trying to increase on-farm income.

As there's more market for ethanol, there's more market for corn, that raises prices, on-farm income increases, which is not only good for the farmer, it's good for everybody in agribusiness, the co-ops, the manufacturers of equipment, local communities.

- Awesome.

Tyler, do you have a website where our audience can go to to learn more about Absolute Energy and ethanol?

- Yes, www.absenergy.org.

- Thank you, and appreciate you joining us today.

- Thank you very much, my pleasure.

- Well, that will just about do it from here.

I'm Dan Hoffman.

Thanks again for joining us on "Farm Connections."

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