INCENTIVES TO BUY AND SELL POULTRY LITTER

Concern about excess animal waste in some watersheds continues to make headlines near the poultry growing areas of eastern Oklahoma and western Arkansas. Stronger enforcement of regulations and threats of new litigation have increased pressure on growers to transfer poultry litter out of these areas to areas of soil phosphorus deficiency. At the same time, commercial fertilizer prices have risen significantly. This is opening new opportunities for litter marketing. There have been many new postings on the Oklahoma Litter Market website (www.ok-littermarket.org), and contacts with earlier listings indicate increasing sales of litter outside the poultry growing areas. To stimulate the market, three incentive or subsidy programs are currently available in Oklahoma.

Subsidies to poultry producers, haulers

In the Oklahoma portions of Spavinaw Creek and Illinois River watersheds, covering portions of Adair, Cherokee and Delaware counties, a direct payment will be made to producers for their litter and to service providers to offset hauling costs. The state, the EPA, and poultry companies fund this program cooperatively through the Oklahoma Conservation Commission (OCC).

BMPs, Inc., a private contractor in Farmington, AR, manages the program. They pay poultry producers a minimum of $2/ton for their litter. Haulers currently receive $0.05 (5 cents) per ton per loaded mile, up to $8 per ton (up to 160 miles). For trips under 160 miles, the unused mileage subsidy will be added to the $2/ton litter payment to the poultry producer. So for example, if the litter buyer is 100 miles from the loading point, the hauler would receive $5/ton and the poultry producer would get the $2 minimum + $3 unused hauling subsidy for a total of $5/ton.

Growers and haulers who wish to participate in this program must be signed up with Sheri Herron, of BMPs, Inc. Currently, BMPs is coordinating all transactions between buyers, sellers and haulers. The BMPs, Inc. toll-free number is 866-304-2784. Or visit their website at: http://www.litterlink.com.

To be eligible for payments, the litter must come from the Spavinaw Creek or Illinois River watersheds and must be applied by certified applicators on row crops, pasture, forage, or forestlands. There are some restrictions on areas where litter subsidized by this program can be applied. Contact BMPs, Inc. for details.

Incentives for non-poultry producers

For agriculture producers who are not poultry growers, two incentive programs are now available.

The Environmental Quality Incentives Program (EQIP) statewide funding pool for manure transfer is operated by the Natural Resources Conservation Service (NRCS) and continuous signup is available at local NRCS field offices in the Eastern Half of Oklahoma. Signups were accepted until November 15, 2006 for funding in 2007. Signups after that date will be for 2008. Manure (litter) must originate from state-designated Scenic River watersheds and Nutrient Limited watersheds extending into Arkansas and Oklahoma and must be applied to cropland or pastureland in Oklahoma outside of these watersheds (see NLW, below).

Eligible applicants must not have purchased or applied animal manure on land they have owned or operated at any time in the past 3 years, and they must plan and implement a Nutrient Management Plan (NMP). This is a competitive program; the ranking scale is based on destination of poultry litter, soil test phosphorus level, and land application technique (surface applied vs. incorporated or injected). Incentive payments range from $4.50 to $12.00/ton, depending on the distance the manure is hauled. The program was funded for a total of $200,000 for 2007.

Oklahoma State Tax Credit: A second incentive available to litter buyers is a tax credit of $5 per ton of litter purchased and transported, to be credited against the buyer’s Oklahoma state income tax. The credit was established by H.B. 2218, signed by the Governor in 2004, and became effective January 1, 2005. If the tax credit due to an individual exceeds the amount of income tax he/she owes, the unused credit may be carried over for up to 5 years. This program is funded at $375,000 annually.

The following is excerpted from the OK Tax Commission (OTC) rule, OAC 710:50-15-95:

“In order to qualify for the credit, the poultry litter must be:

1. purchased from a registered Oklahoma-based poultry operation located within an environmentally sensitive and nutrient-limited watershed [NLW-see below];

2. used or spread in a watershed that is not environmentally sensitive and nutrient-limited, and

3. applied by a certified poultry waste applicator.”

A written Animal Waste Management Plan or Conservation Plan was required in an OTC draft rule in 2005. The final OTC rule does not contain that requirement. However, it is recommended that farm operators considering this credit consult with their local NRCS Conservationist so an appropriate management plan can be documented.

The OTC has included the Poultry Litter Tax Credit in their tax form #511CR, “Schedule for Other Credits”, for filing with the 2006 state income tax return. This is available on the Internet at

http://www.tax.ok.gov/it2008/511-CR-08.pdf.

No other required documentation is mentioned in the OTC rule. However, it is recommended that in addition to an AWMP, claimants should keep invoices documenting the place of origin of the litter, where and by whom it was spread, and scale tickets showing the net tonnage. Producers should consider consulting with a tax advisor before purchasing litter based on expectation of this credit.

Regardless of incentive or subsidy, the law requires that litter must be applied by a Certified Commercial or Private Applicator, and a soil test report must be provided for all application sites. A recent litter test should also be supplied by the applicator.

Remember that subsidies alone do not make litter a good economic or environmental choice. The nutrient requirements of the soil and crop must be considered along with the nutrient contents and total cost of the litter. The best tools for this purpose are the OCES Soil Test Interpretation and Fertilizer Decision Support program and Fertilizer Blending and Cost Calculator available on the Internet at:

http://www.soiltesting.okstate.edu/Interpretation.htm

Nutrient Limited (NLW) and Scenic River Watersheds

It is best to consult with your local NRCS to determine whether a particular site is in a NLW or Scenic River watershed. However, the NLW and Scenic River watersheds are listed in Appendix A of the Oklahoma Water Quality Standards, available from the Oklahoma Water Resources Board on the Internet at:

http://www.owrb.state.ok.us/util/rules/pdf_rul/Chap45.pdf.

A map showing currently designated NLW watersheds is available from the OWRB at:

http://www.owrb.state.ok.us/maps/pdf_map/Nutrient_Limited_Watersheds.pdf

A map showing the NRCS EQIP Manure Transfer Incentive Project Areas is available at:

ftp://ftp-fc.sc.egov.usda.gov/OK/programs/eqip/fy07/ManureMap.pdf