Value-Added Producer Grants


Helping farmers create and expand value-added products and enterprises

When farmers and entrepreneurs take raw agricultural products like vegetables or grains and turn them into something value-added – like jams or bread – they not only improve their income, but also contribute to community and rural economic development and enhance food choices for consumers. The Value-Added Producer Grant (VAPG) program provides competitively awarded 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. These grants may be used to fund business and marketing plans and feasibility studies or to acquire working capital to operate a value-added business venture or alliance.

Learn More About VAPG!  

 

Program Basics

The Value-Added Producer Grant (VAPG) program is a competitive grant program administered by the Rural Business-Cooperative Service of USDA that provides funding to farmers and groups of farmers to create or develop value-added producer-owned businesses. These enterprises help increase farm income and marketing opportunities, create new jobs, contribute to community economic development, and enhance food choices for consumers.

The term “value-added” includes any agricultural commodity or product whose value has been increased by:

  • Undergoing a change in physical state (e.g., turning fruit into jam);
  • Being produced, marketed, or segregated for its special character or identity (e.g., GMO-free, organic, grass-fed);
  • Transforming natural resources into energy on the farmstead (e.g., biodiesel);
  • Being aggregated and marketed as a locally-produced food (e.g., as part of a Buy Local campaign, state-produced branding or labeling effort); or
  • Linking farmers with local and regional supply networks in which they are equal partners (e.g., farm to school or other mid-tier value chains)

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

  • Engage in economic planning to develop business and marketing plans and feasibility studies needed to establish viable marketing opportunities for value-added products; or
  • Acquire working capital to operate a value-added business venture or alliance.

Eligibility 

Entities eligible to apply for VAPG funds are:

  • Individual agricultural producers
  • Groups of agricultural producers, including farmer cooperatives
  • Majority-controlled producer-based business ventures
  • Organizations representing agricultural producers
  • Farmer or rancher cooperatives

Agricultural producers eligible for the program include farmers, ranchers, and harvesters, including loggers and fishermen. The applicant producer(s) must supply at least half of the commodity needed for the project and clearly demonstrate that the project will expand the customer base and increase revenues. Businesses with majority farmer ownership are eligible to apply but cannot make up more than 10 percent of total awarded funds.

The Program in Action

Whether enabling dairy farmers in Nebraska to expand their line of fluid milk products or allowing an organic grain farmer in Missouri to test the feasibility of equipment purchases for on-farm processing and milling, the Value-Added Producer Grant program has been helping thousands of farmers around the country with expanding their customer base and income by creating new or developing existing value-added businesses.

Sample projects that were launched with VAPG funds include:

  • In 2012, McKaskle Farm in Missouri, which grows a variety of organic grains, received a planning grant to evaluate the financial feasibility of purchasing equipment to clean, process, and package their products. The VAPG grant allowed McKaskle to examine and evaluate options for scaling up business to sell to more local retailers.
  • In 2013, Burbach Countryside Dairy in Nebraska received a working capital grant to help with the marketing and promotion of fluid milk products. With Burbach milk products already being sold in more than 70 stores in Nebraska, Iowa, and South Dakota, the VAPG grant helped the dairy expand, retaining four existing jobs and creating at least four new jobs.
  • In 2013, the Wisconsin Food Hub Cooperative in Wisconsin received a working capital grant to assist in the startup of a regional fresh produce food hub and packinghouse created to enhance access to wholesale markets for the local farm economy. The food hub plans to aggregate local produce sold under the Wisconsin Farmed brand.
  • In 2014, the Cherokee Nation in Oklahoma received a planning grant for a feasibility study to, among other things, examine the potential for non‐GMO seed certification and the marketing and development of the Cherokee Food brand.
  • In 2014, Hero Farms, Inc. in North Carolina received a working capital grant to pay for contracted labor, packaging and delivery of value‐added products (specifically, spring mixed salad greens, vegetable stir‐fry, and a fruit and vegetable bar), and labeling and marketing of a variety of produce grown by 84 Montagnard Refugee farmers.

Read more about how VAPG has helped provide new and increased marketing opportunities for farmers, spurred rural economic development, and provided consumers with more food choices: 

How to Apply and Program Resources
Each year, USDA’s Rural Business-Cooperative Service publishes a Notice of Funding Available, or NOFA, in the Federal Register and solicits applications from eligible farmers and groups of farmers to apply for value-added producer grants. There is no set timeframe for when the NOFA is typically released. Usually, applicants have 60 to 90 days to apply and submit their applications to USDA.

Proposals must be submitted via www.grants.gov. Applications are first sent to state USDA Rural Development offices for review and evaluation for completeness and eligibility. They are next sent to independent, non-federal grant reviewers to be evaluated and ranked. USDA staff in Washington then conducts a final review to assign any additional administrative priority points.

There are two types of grants under VAPG:

  • Planning grants to fund economic planning activities such as the development of business and marketing plans and feasibility studies needed to establish viable marketing opportunities for value-added products; and
  • Working capital grants to fund the operation of a value-added business venture, specifically to pay for eligible expenses related to the processing and/or marketing of the value-added product.

Working capital requests of $50,000 or more must be supported by an independent feasibility study and business plan.

Grant funds may not be used for repair, acquisition, or construction of a building or facility or to purchase, rent, or install fixed equipment.

All grant funds must be matched on a 1:1 basis. Matching funds may be in the form of cash or eligible in-kind contributions. Up to 25 percent of the total project cost, or in other words, up to 50 percent of the match, may come from the farmers’ own time and effort (sometimes known as “sweat equity”) put into the project. The other half or more of the match must be in cash.

By law, there are two 10 percent funding set-aside categories, one for mid-tier value chain projects, and one for projects creating opportunities for beginning, socially disadvantaged, or veteran farmers or ranchers. The set-asides are intended to ensure that these priorities are more likely to be supported in funded grants. Any of these funds that are set-aside but remain unused by June 30 of each year are re-pooled so they can be used to support other grants.

Additionally, in making grant awards, USDA is required by law to prioritize projects that increase opportunities for (1) small- and medium-sized family farms and ranches, (2) beginning farmers or ranchers, (3) socially disadvantaged farmers or ranchers, and (4) veteran farmers or ranchers.

In ranking VAPG applications, USDA awards 10 points to those projects that are focused on aiding farmers in these categories. If two or more applications have the same ranking point total, the one that addresses one of the program priorities will be ranked higher than one that does not.

For more information on how to apply, please see the following websites:

 The NSAC Farmers’ Guide to Applying for Value Added Producer Grant Funding

The USDA Value Added Producer Grant program

The Rural Business-Cooperative Service of USDA

Program History, Funding, and Farm Bill Changes

VAPG was first authorized in 2000 and provided with $20 million per year in mandatory funding. The program was subsequently expanded as part of the 2002 Farm Bill to include inherently value-added production, such as organic crops or grass-fed livestock, and funding doubled to $40 million per year. In the 2008 Farm Bill, the program was expanded again to include locally produced and marketed food products and mid-tier value chains.

In the 2008 Farm Bill, VAPG was one of just three programs in the Rural Development Title to receive mandatory funding, but its funding dropped dramatically to $15 million total for all five years of the bill, along with an authorization for additional discretionary funding.

The 2008 Farm Bill also created two 10 percent funding set-aside categories, one for mid-tier value chain projects, and one for projects creating opportunities for beginning or socially disadvantaged farmers or ranchers. Additionally, the 2008 Farm Bill required USDA to prioritize projects that increase opportunities for: (1) small- and medium-sized family farms and ranches, (2) beginning farmers or ranchers, and (3) socially disadvantaged farmers or ranchers.

The 2014 Farm Bill makes two significant changes to the program by adding veteran farmers and ranchers as a new fourth priority category and also changes the process for providing priority consideration for projects by groups of producers. Rather than having group applicants meet a numerical requirement regarding what percentage of a cooperative’s members are beginning, socially disadvantaged or veteran farmers, USDA will now be required to prioritize those projects that “best contribute to creating or increasing marketing opportunities for small and medium-sized family farms and ranches or beginning, socially disadvantaged, or veteran farmers and ranchers.”

The 2014 Farm Bill provides $63 million in one lump sum mandatory funding for the program for the years 2014-2018. We expect USDA to allocate this funding at a rate of approximately $16 million a year between 2015-2018 (see chart below).

While this is a substantial increase over recent years, current funding levels for VAPG are still a fraction of what they were at the height of the program in the 2002 Farm Bill.

Value Added Producer Grants Program Funding

Fiscal Year Total Mandatory Funding Available (in millions)*
2014 $0
2015 $15.75
2016 $15.75
2017 $15.75
2018 $15.75
5 yr total $63

*The 2014 Farm Bill provides a lump sum of $63 million for VAPG over the life of the Farm Bill (2014-2018). It is unclear how much of those funds will be made available each year for a grant round. No mandatory funds were used in Fiscal Year 2014. Assuming equal annual allocations, there will be nearly $16 million available in mandatory funding each year for four years.

In addition, Congress also appropriates annual discretionary funding for the program. The appropriated amounts for the Fiscal Years 2010-2014 were as follows. Future appropriations for VAPG will be determined on an annual basis by Congress. USDA will use the combination of mandatory and discretionary funding for the program each year.

Recent Appropriations Funding for VAPG

Fiscal Year Appropriated Annual Funding (in millions)
2010 $20.4
2011 $18.9
2012 $14.0
2013 $13.8
2014 $15.0

Authorizing Language

Section 6203 of the Agricultural Act of 2014 amends Section 231(b) of the Agricultural Risk Protection Act of 2000, to be codified at 7 U.S.C. Section 1632a(b).


Last updated in November 2014.