Value-Added Producer Grants

Helping farm producers move into value-added agricultural enterprises

Formerly known as the Value-Added Development Grants Program, the Value-Added Producer Grant Program (VAPG) is a competitive grants program administered by the Rural Business Cooperative Service at USDA. The program was authorized in the 2002 Farm Bill to receive mandatory funding for up to $40 million annually through 2007. In recent years, Congress has chosen to reduce this amount; VAPG is funded at $15 million in FY 2004, for example.

The definition of a value-added product includes:

A change in the physical form of the product, such as milling wheat into flour or strawberries into jam
Producing a product in a way that enhances its value, such as "organic," "free-range," "grass-fed," etc.
Physically segregating an agricultural commodity or product in a manner that results in the enhancement of the value of the agricultural product, such as the identity preserved marketing systems.

The definition of value-added product includes any agricultural product or commodity used to produce renewable energy on a farm or ranch.

Project Examples

A grant of $64,500 was awarded to the Arizona Pistachio Association to conduct a feasibility study and prepare a business plan to develop a processing facility and direct marketing strategy for Arizona 's pistachio production.
The California Wild Rice Growers Association was awarded $130,000 for working capital to develop, package, evaluate, and market soy-enhanced wild rice snack chips.
Three farmers in Fort Pierce , FL , were awarded $15,000 to expand the marketing of their "certified organic" products.
$149,000 was granted to Ag Ventures Alliance Cooperative in Iowa to study the feasibility of an aquaculture business that will add value to the grain produced by its farmer owners.
A grant of $108,000 was awarded to Maine Sustainable Agriculture Society for working capital for the operational costs of linking central Maine institutions with local agricultural producers to tap the emerging market for locally grown, organic and conventional foods.
$249,830 was granted to Chesapeake Fields Farmers in Maryland to complete a feasibility study and business plan for a value-added venture to process small grains and eventually operate a bakery.
The United Cooperative Farmers in Massachusetts was awarded $50,000 to complete a feasibility study and marketing and business plan to create a new, fully traceable, dedicated organic feed manufacturing venture.
$75,605 was awarded to the Midwest Nut Producers Council in Michigan to assess the feasibility of marketing products produced from small and broken peeled chestnuts.
Harvest Land Cooperative in Minnesota was granted $148,000 to assist in the development of on-farm renewable energy generation using wind.
A grant of $323,837 was given to Amazing Grains Cooperative in Montana for working capital to expand processing capacity and markets for a value-added gluten-free Indian ricegrass product.
Dakota Renewable Fuels in North Dakota was awarded $167,500 to complete a business plan, complete offering documents, conduct an equity drive and complete other activities needed to develop a 30-million gallon dry-mill ethanol plant.

Application and Financial Information
The most recent information on funding availability and applications is available through each state's USDA Rural Development Office. A list of every state office is printed at www.rurdev.usda.gov/rbs/coops/vadgstateoffice.html.

When applying for a grant, applicants must choose between two different types of activities for funding:

Developing feasibility studies or business plans, which include marketing plans
Working capital to operate a value-added business or alliance.

Applicants are eligible to apply for only one of these two types of grants each grant cycle The maximum grant award is $500,000, but smaller grants have priority.

The request for proposal (RFP) includes a list of evaluation criteria that are used to score applications for strength and merit. Reviewers award points to each application based on how well the applicant has addressed the requirements spelled out in the evaluation criteria. The program requires a one-to-one match. A cash match is defined as actual funds dedicated to the project. An in-kind match includes time, equipment, space, staff salaries, etc.

Applicants are advised to contact their State USDA Rural Development Office to discuss a proposed project and ask for information about the VAPG program. Completed applications are submitted to that state USDA office for review. Prospective applicants should also be in touch with the marketing divisions of their state Departments of Agriculture, many of which offer workshops on how best to apply for the program. Such workshops can provide information, applications, and guidance on when and how to apply for a grant.

Eligibility, Uses, and Restrictions
If you are a farmer, a farmer or rancher cooperative, agricultural producer group, or a majority-controlled producer-based business venture, you are eligible to apply for a value-added grant. The RFP will provide definitions for all of these entities.

VAPG grant funds can be used to conduct feasibility analyses, develop business plans or business marketing plans; obtain legal advice or accounting services; pay salaries, utilities or other operating costs; purchase office equipment, computers, or other supplies; or finance other related activities needed to set up the proposed business venture.

Funds cannot be used to plan, design, rehabilitate, acquire, or construct a building or facility; buy, rent, or install fixed equipment, including mobile and other processing equipment; pay for preparation of the grant application; pay expenses not directly related to the venture; undertake political or lobbying activities; reimburse costs incurred before the grant; or for expenses related to production of the commodity to which value will be added.

Contact
Gail Thuner
Phone: (202) 690-2426

Marc Warman
Phone: (202) 690-1431

Information about applying for a VAPG is available at each state's USDA Rural Development Office. A list of contacts by state is at www.rurdev.usda.gov/rbs/coops/vadgstateoffice.htm .

Internet
www.rurdev.usda.gov/rbs/coops/vadg.htm

Last Updated January 24, 2005