Contracts for the purchase of 120,000t of straw annually are being offered to tillage farmers in the midlands.
The purchase agreements have been tabled by the energy company Biotricity who plan to develop a combined heat and power plant in Rhode, Co Offaly.
The 15mw facility will burn straw to produce electricity and use the heat from the process to dry biomass materials.
Briain Smyth, operations director with Biotricity, said the company aimed to begin building work on the site in the third quarter of this year and would be ready to start operations in 2013.
He said putting agreements in place to secure adequate supplies of straw was now a priority for the company.
He added that the company would take straw from growers within a 100-mile radius of the plant.
Talks have been ongoing between Biotricity and a team from the IFA's grain committee and it is understood that the framework of a deal is close to being agreed.
IFA grain committee secretary Fintan Conway said he was "optimistic" about the outcome of the negotiations but he cautioned that there was "a way to go to finalise the deal".
Under the current proposals, farmers would get an average price of €14.50 for an 8x4x3 bale. However, the price paid will vary according to the moisture content of the straw.
For example, straw delivered at 8pc moisture would make €60.99/t, at 12pc moisture it would make €57.09/t, at 15pc moisture it would make €54.16/t, at 18pc moisture it would make €51.23/t and at 20pc moisture the payment would be €49.28/t.
Mr Smyth said the logistics of transporting and storing the straw meant it had to be delivered in highly compacted 8x4x3 bales that weighed a minimum of 500kg. The straw had also to be chopped to 40mm or less. Biotricity will employ contractors to do the baling.
Each bale when baled will be tagged and this tag will record a range of information including the farmer's name, the weight of the bale and the moisture content of the straw.
Mr Smyth explained that farmers will receive dockets detailing all deliveries to the plant and this will form the basis for payments.
The company has also proposed to put in place a credit insurance mechanism or a guaranteed bond to ensure that farmers will always get paid.
Biotricity is keen to sign farmers up for contracts of up to 15 years. However, Mr Smyth said the company would be willing to agree five-year rolling contracts.
Commenting on the proposed package, Mr Conway said it would make sense for a lot of growers but it might not suit others.
However, he pointed out that the contract would help put a floor on straw prices as it would take around 8pc of total straw production in the country.