On Tuesday, June 28, USDA’s Rural Business-Cooperative Service will announce that its Value Added Producer Grant Program (VAPG) will be open for applications until the deadline of August 29, 2011.  The Notice of Funding Availability (NOFA) appears in the June 28 edition of the Federal Register.  Advocates for the program are delighted the long anticipated announcement of a new funding round is being made following several delays.

Program Basics

VAPG is a competitive grants program that awards grants to producers to help them develop farm-related businesses that add value to basic agricultural products through branding, processing, product differentiation, labeling and certification, and marketing.  Value-added products and marketing help improve farm income and farm and rural employment opportunities while creating more choices for consumers.

VAPG includes projects that market inherently value-added production, such as organic crops, grass-fed livestock, and locally produced and marketed food products.  VAPG also funds regional food supply networks that benefit the small and mid-sized farms by incorporating the producer into the larger farm-to-fork value chains.

Grants may be used to develop business plans and feasibility studies (including marketing plans) needed to establish viable marketing opportunities for value-added products or to acquire working capital to operate a value-added business venture or alliance.  Working capital applications generally must be supported by an independent feasibility study as well as a business plan.

$37 Million Available

Approximately $37 million in competitive grant funds is available through the VAPG program.  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.

The agency estimates it will make about 250 awards.  Awards are expected to be announced by the end of November.

Applicants may submit a planning grant (up to $100,000 each) or a working capital proposal (up to $300,000 each).  The agency is estimating, based on previous experience, the average size grant award will be $116,000.  In the last round of awards, 41 percent of total awards were under $50,000.

Applicants may propose any time frame for the project provided it does not exceed three years.

Match Requirement

Applicants will be required to show a one-to-one match for all grant funds.  Up to half of the match (i.e., up to 25 percent of total project costs) may come from the farmers own time and effort (‘sweat equity’) put into the venture.  Applicants must verify the availability and the sources of all matching funds at the time the application is submitted.

Priority Categories and Reserve Funds

Ten percent of total funds are reserved for applications by beginning or socially disadvantaged farmers and ranchers or group projects in which beginning or minority farmers are a majority of the participants.  Another ten percent of total funds are reserved for mid-tier value chain projects, meaning local and regional food supply networks that link farmers with other businesses and coops that market value-added products in a manner that improves small and medium-sized farm profitability.

The farm bill requires USDA to provide a priority for grant funding to small and medium-sized farms organized as family farms, to beginning farmers and ranchers, and to socially disadvantaged farmers and ranchers.  Small and medium-sized farms includes all operations with gross sales of less than $1 million.  These priority categories receive special ranking points in the grant review process (see below).

In addition to the farm bill priority categories, USDA has taken it upon itself to also grant priority status to any project proposal from any farm coop, regardless of the size of the coop or the status of the beneficiaries.  NSAC is protesting this administrative decision to go beyond the explicit directives of the farm bill in a manner that could negate the statutory priorities.  See additional NSAC views in our comments to USDA on the VAPG rule.

Ranking Criteria

In ranking proposals for funding, likelihood of success and economic sustainability accounts for 30 percent of the score, qualifications of personnel accounts for 20 percent, and, counting for 10 percent each are commitments from other farmers/third party contributors/end users, quality and comprehensiveness of the budget and work plan, and being part of a priority group.  The final 10 percent will be awarded to improve the geographic distribution of the awards.

With respect to that final 10 percent based on geographic diversity, the NOFA also states that USDA is encouraging applications that will support urban and rural areas that have limited access to healthy foods and high poverty and hunger rates.

Applications

Applicants may submit a draft proposal to their State USDA Rural Development Office for preliminary review within 30 days (July 27).  It will be reviewed for eligibility and completeness, which could be a helpful step especially for anyone who has not submitted a VAPG proposal before.

As required by the farm bill, applicants requesting less than $50,000 in funds may be able to use a streamlined application process.  For working capital grants under $50,000 the requirement to provide a feasibility study or business plan is waived, provided the applicant can demonstrate a projected increase in customer base and revenue.  In addition, independent producer applicants (but not farmer controlled coops or corporations) seeking greater than $50,000 in working capital may submit a business or marketing plan in lieu of a feasibility study if they have produced and marketed the value-added product for at least two years and are seeking simply to expand their market.

Get the application package from the Rural Development site.

You can also find out more about eligibility and the application process guidelines by contacting your local USDA Rural Development Office, or contact the national program staff  Lyn Millhiser at 202-720-1227 or Tracey Kennedy at 202-690-1428, or by emailing cpgrants@wdc.usda.gov for additional information.

Additional Resources

If you are an agricultural producer or producer-controlled entity interested in applying, you can learn more at NSAC’s VAPG page and read this guide to applying from the University of Wisconsin’s Agricultural Innovation Center, or this guide from Iowa State University’s Agricultural Marketing Resource Center.  Templates for applications are available from the University of Nebraska’s Food Processing Center.  More information specifically about this 2011 iteration of the program will likely be forthcoming in the near future.

NSAC member organization California FarmLink just hosted a workshop on developing a VAPG application.  Other groups or institutions may be doing similar events in the coming month –look for one in your area.

To see how the FY 2009 awards were distributed and 15 examples of the projects that were funded, go to NSAC’s two page summary of the 2009 VAPG projects.

Read about a VAPG award in Wisconsin for a lamb processing facility supporting 30 farmers and 6 full time employees in this guest blog.

To read a summary of the NSAC comments to USDA on the February 2011 Interim Final Rule for VAPG, or to read those comments in their entirety, go to this earlier blog post.

A video of USDA Deputy Secretary Kathleen Merrigan discussing the many innovative uses of the VAPG program is also available for viewing.