Value-Added Producer Grants

Program Basics

The Value-Added Producer Grants (VAPG) program provides competitive grants to individual independent agricultural producers, groups of independent producers, producer-controlled entities, organizations representing agricultural producers, and farmer or rancher cooperatives to create or develop value-added producer-owned businesses.

Agricultural producers include farmers, ranchers, loggers, agricultural harvesters and fishermen that engage in the production or harvesting of an agricultural commodity. These enterprises help increase farm income, create new jobs, contribute to community and rural economic development, and enhance food choices for consumers.

The term “value-added” includes an agricultural commodity or product that has undergone a change in physical state or was produced, marketed, or segregated (e.g. identity-preserved, eco-labeling, etc.) in a manner that enhances its value or expands the customer base of the product.

The program was first authorized in 2000 and was expanded as part of the 2002 Farm Bill to include inherently value-added production, such as organic crops or grass-fed livestock, and expanded again in the 2008 Farm Bill to include locally produced and marketed food products and mid-tier value chains (see below).

Grants may be used to fund one of the following two activities:

Grant funds may not be used for repair, acquisition, or construction of a building or facility or to purchase, rent or install fixed equipment. Cash and/or in-kind matching funds are required, must be at least equal to the amount of Federal funds awarded, and must be expended in advance, such that for each grant dollar advanced, an equal amount of match shall have been expended first.

The program is administered by the Cooperative Division of USDA’s Rural Business Cooperative Service and grant applications are first screened through each state’s USDA Rural Development Office.

Most Recent VAPG Grant Year Funding Info – FY 2011
Actual Total Program Funding

$37m in competitive grant funds for fiscal year 2011

Range of Awards

$100,000 for planning grants and $300,000 for working capital grants

Average Grant Amount

$116,000 (based on prior funding years)

Cost Sharing Requirements

Matching funds required

2008 Farm Bill Changes

The definition of a value-added agricultural product now includes – in addition to one that has been processed, segregated, produced with inherently value-added characteristics, and/or is a source of farm or ranch-based renewable energy – an agricultural commodity or product that is aggregated and marketed as a locally-produced agricultural food product.

Farmers can now be funded under the program for the development of mid-tier value chains, which the farm bill defines as local and regional supply networks that link independent producers with businesses and cooperatives that market value-added agricultural products in a manner that:

The mid-tier value chain provision is aimed at assisting farmers and ranchers who are too large or remote to engage substantially in marketing directly to consumers but too small to profitably engage in high volume, low margin raw commodity production. It is intended to capitalize on the increasing demand for high quality products from family farms adhering to strong environmental and social values.

USDA will now be offering a simplified application form for small projects requesting less than $50,000. Many of the smaller grants are single farmer projects or lower cost feasibility studies, for which larger-scale working capital applications are unnecessarily complex.

In making grant awards, USDA will now be granting priority to projects that increase opportunities for (1) beginning farmers or ranchers, (2) socially disadvantaged farmers or ranchers, or (3) other operators of small- and medium-sized family farms and ranches.

Two 10% funding set-aside categories were established, one for mid-tier value chain projects, and one for projects creating opportunities for beginning or socially disadvantaged farmers or ranchers. The set-asides are intended to ensure that these objectives are more likely to be supported. If not enough projects are proposed in these categories, the funds set-aside will be returned to the basic pool. Please refer to the funding section below for additional details.

Section 6202 of the Food, Conservation, and Energy Act (FCEA) of 2008 amends Section 231 of the Agricultural Risk Protection Act of 2000, to be codified at 7 U.S.C. 1621 note.

Funding

The 2008 Farm Bill provided $15 million in mandatory funding which has already been used up and authorized an additional $40 million a year in discretionary funding authority.

The funding level for 2011 is $37 million.  This year’s NOFA for the program incorporates two year’s worth of funding provided by Congress, adding together fiscal year 2010 and 2011 VAPG appropriations.  The 2010 edition of the program was delayed by a lengthy rule writing process.  Applications for FY 2011 funding were due August 29, 2011.

No matter the funding outcome year-to-year, 10% of the total each year will be reserved for mid-tier value chain projects, and another 10% will be reserved for projects benefiting beginning or socially disadvantaged farmers and ranchers.

Implementation Basics

VAPG is an annual competitive grants program.  USDA’s Rural Business Cooperative Service issues a Notice of Funding Availability (NOFA) each year for VAPG and publishes it in the Federal Register.  The NOFA describes the program, application procedures, and any particular emphases of the program for that particular year.

There is also a federal rule that guides program implementation.

For up-to-date application deadlines and links to the current RFA, please go to: http://sustainableagriculture.net/publications/grassrootsguide/farm-bill-programs-and-grants.

Types of Valued-Added Activities Eligible for Grants

Commodity Processing

Market Differentiation

Commodity Segregation

On-Farm Renewable Energy

Local Food

Mid-Tier Value Chain

Increasing value by changing commodity’s physical state

Increasing value by marketing the commodity’s special identity or character

Increasing value by keeping the commodity physically apart in production and distribution

Realizing value by transforming natural resources into energy on the farmstead

Increasing value by aggregating and marketing food for local markets

Increasing value by linking farmers with local and regional supply networks in which they are equal partners

Examples: wine, flour, cheese, jam, biodiesel

Examples: organic, grass-fed, humane, state branding

Examples: GMO-free, no-rBGH, Varietal purity

Examples: wind, solar, geothermal, on-farm biodiesel

Examples: buy local - buy freah, community based food enterprises, supplying local procurement preferences

Examples: farm to institution, farm to food service or restaurant , value chain using a consumer seal

Planning or working capital

Working capital

Planning or working capital

Planning or working capital

Planning or working capital

Planning or working capital

Examples of Past Grant Recipients

Nebraska Small Farms Cooperative, Oneill, NE

The Nebraska Small Farms Cooperative received a $250,000 grant in 2004 to expand its product line and market overseas. The coop has grown from 29 farmers/members in 2004 to over 90 today. It markets pre-cooked, USDA verified, non-hormone treated meat to businesses in the U.S. and Europe. Not only has the coop passed value-added profits back to farmers, but its success has also spilled over to a local meat processing plant as annual processing contracts were signed to benefit both parties.

Pinn-Oak Ridge Farm, Delavan, WI

In 2005, Steve and Darlene Pinnow received a $150,000 grant to brand and direct market their pasture-raised lamb. It has allowed them to expand their market from 40 restaurants and grocery stores to 60 retailers in Wisconsin and Illinois. The Pinnows are now working with a distributor in Chicago who learned about their pastured lamb from the USDA announcement of their VAPG grant.

Ives Cream, Norwich, New York

The Ives family operates a sustainable dairy farm that has been handed down through six generations. With the help of a $47,550 VAPG grant in 2004, they planned and executed a successful marketing campaign for their premium ice cream. Today, they operate a seasonal retail ice cream parlor in downtown Norwich, NY where great locally-produced ice cream, customer service, and a community focus have proven to be a winning business combination.

Prairie Pride, Inc., Deerfield, Missouri

This new-generation, producer cooperative that will be converting soybean oil into bio-diesel fuel with the help of a $300,000 working capital grant in 2006. The new facility will ultimately crush 21,000,000 bushels of soy beans per year to obtain soy oil.  The refinery will then convert that soy oil into 30,000,000 gallons of bio-diesel.

USDA Contact Information and Online Resources

USDA website for the VAPG Program: www.rurdev.usda.gov/rbs/coops/vadg.htm.

An online assessment tool is available at www.rurdev.usda.gov/rbs/coops/vapgea.htm that will assist you in determining whether or not you are eligible to apply for a VAPG grant.

Contact your state office (you can find it here http://www.rurdev.usda.gov/recd_map.html) for updated information or Tracey Kennedy, USDA Program Leader, Cooperative Programs, ,