August is the key decision window for many farmers when it comes to cover crops. Seed availability, aerial application windows, and rotation planning all start coming into focus this time of year, well before the first combine rolls. But this year, there’s a new layer to consider: the evolving landscape regarding the 45Z clean fuel production tax credit and its potential ability to officially recognize cover crops as a qualifying climate-smart practice that can reduce the carbon intensity (CI) of biofuel feedstocks. That means cover cropping isn’t just a soil health strategy anymore—it also stands to be an extremely impactful documented emissions-reduction opportunity.With that impact in mind, we want to help farmers and feedstock suppliers understand what’s needed to qualify under 45Z when it comes to raising a cover crop, and to evaluate whether cover cropping makes agronomic and economic sense on their operation. As with all CI practices, documentation and verification are essential—but the decision still starts with the basics: soil health, weed pressure, nutrient management, and financial feasibility.

Cover Crops in 45Z: Implementing Guidance in Real-world Applications
‍‍
Under the USDA’s January 2025 Technical Guidelines for Climate-Smart Agriculture (CSA) used as a Biofuel Feedstock, cover crops are specifically named as a practice that can reduce GHG emissions and contribute to CI reductions. The 45Z tax credit—designed to reward low-CI fuels—takes this one step further, offering ethanol producers a per-gallon incentive for clean production pathways. If a plant is near the $0.10/gal rounding threshold, a verifiable practice like cover cropping can push them over the line.

‍PLEASE NOTE:
‍While 45Z is written into law and extended through 2029, current USDA guidelines to recognize feedstocks in a fuel CI scoring formula are preliminary and awaiting year-end final guidance. Biofuel producers and their feedstock providers are diligently preparing for that final guidance with the optimism that CSA crops (including cover crop applications) are a part of the final guidance and applied to feedstock production in 2025 and beyond.

Preliminary or not, recognition of a CI benefit only counts if it’s documented. Here’s what’s set to be required under current guidance:

• Proof of seed purchase (invoice or receipt)

• Field-level identification and acreage
• Seeding details: date, method, and rate
• Evidence of establishment, such as time-stamped, georeferenced photos or satellite imagery
• Termination method and date
• Corn yield data from each field where the practice was used
• If legumes are used (e.g., clover or vetch), a nutrient budget is required, along with a soil test less than two years old.

Key reminders:These subtle process refinements bring disproportionate benefits in a GREET context.
‍

• No fertilizer may be applied to the cover crop.
• No grazing, harvesting, or burning of residues.
• All documentation must be kept for five years, in either paper or digital form.

If you’re planning to seed a cover crop ahead of your 2026 corn crop, you’ll need to start collecting this data now. And you’ll want to have early conversations with your local ethanol plant about their 45Z readiness and what practices they’re incentivizing or accepting for credit.

It’s also worth noting that 45Z isn’t a direct payment to the grower. It flows through the ethanol producer—if they qualify. That’s a big “if,” depending on things tying back to their Fuel CI scoring, production inputs, and ability to meet prevailing wage & labor requirements. Still, growers are in the best position to influence feedstock CI. Getting your practices verified and audit-ready is the best way to set yourself up for future value.
‍

Setting Yourself Up for Agronomic Success 

Cover cropping is, and always has been, an agronomic decision first. It’s about managing erosion, building soil structure, improving water infiltration, suppressing weeds, and scavenging residual nutrients. But it’s not one-size-fits-all.

In eastern Iowa and northern Illinois, the range of attitudes I hear about cover crops spans everything from “absolutely not” to “we’ve been doing it for years.” Most fall somewhere in the middle: curious, but skeptical—especially about the economics.

And they’re not wrong to ask. Seed, application, and termination costs can add up quickly. If not managed well, the risk of yield drag or spring management headaches can outweigh the benefits. That’s why I always recommend starting simple.

Two species to consider:

• Oats – A great starter crop. Establishes quickly in fall and winterkills naturally, so no spring termination is needed. Ideal for soybean acres going into corn.
  
• Cereal Rye – A bit more complex. It establishes later and requires spring termination with herbicide (use a full rate and allow at least 10 days before planting corn). Rye is more aggressive, so planning ahead is critical.
  

Sample budget:

• Seed: ~$20/ac
  
• Broadcast application: ~$7/ac
  
• Potash carrier (100#): ~$25/ac
  
• Burndown application: ~$7/ac
  
• Termination (glyphosate): Variable
  

In most cases, without 45Z or additional incentives, the ROI is marginal—unless you’re solving another agronomic problem (erosion, compaction, weed pressure). But if 45Z guidance holds and ethanol plants have the ability to incentivize the origination of low-CI grain, these practices could pencil out.Sample budget:

Best Practices for August Planning
‍‍‍‍
If you’re considering cover crops this year, keep it simple and strategic.

• Start with your best fields, not your problem acres. Poor drainage and topography amplify risk.
  
• Pick species based on your rotation and termination plan.
• Secure seed early and confirm application logistics (aerial vs. post-harvest).
• Start small, learn, and scale up.

‍‍‍
‍Most importantly: document everything. Take photos. Save receipts. Use your farm management software or good old-fashioned notebooks, whatever keeps your records organized and retrievable. And talk to your origination team at your local ethanol plant. If they’re seeking to capture value through 45Z and are trending towards being “in the money”, they’ll want to know who’s growing cover crops in 2024 and who’s ready to verify their practices.
‍

Final Thoughts

‍The current launch-pad for 45Z coupled with the preliminary USDA guidance creates a real opportunity for growers to turn thoughtful agronomy into long-term value. But the programs aren’t automatic. It will take significant coordination and transparency between growers, ethanol-feedstock originators, and service providers to make it work.

My best advice for bringing cover crops into that supply-chain collaboration? Start planning now. Pick your species. Decide on your seeding method. Make a plan for spring termination. Run the economics to ensure the upside in value-add premiums, soil health, and conservation balance out the potential risks. And get in the habit of documenting what you do.

Cover crops might not be the silver bullet, but they’re one of the sharpest tools we’ve got.

Riley Harbaugh, CCA
General Manager, Incite.ag
riley@incite.ag
‍
———
‍
Incite.ag guides producers across the agricultural supply chain to Turn Emissions into Income. Incite.ag’s CI scoring system unlocks novel revenue streams and empowers producers to take control of their unique CI Scores. Learn more by hitting the link below or reach out to the team directly at success@incite.ag or 815.373.0177.