NSAC's Blog

Over $61 Million Invested in Value-Added Agriculture Entrepreneurs

December 21, 2020

Editor’s note: as we were preparing this blog for publication, the USDA announced the next round of funding through the program, with a 90 day application window. NSAC will be updating and publishing our farmers guide to applying for the program first thing in the new year.

“Value-added” foods and goods are made from raw agricultural products (e.g., vegetables, grains, or dairy) that are minimally processed and then transformed into products like cheese, sauces, and breads. Specially labeled or marketed goods (e.g. “organic” or “locally grown”) can also be considered value-added as the label claim makes their products more appealing (valuable) to consumers. Value-added products bring in higher prices than raw products alone, which helps farmers and ranchers improve their bottom lines and grow their businesses – which in turn increases hiring and spending in their local communities! 

Making the jump to value-added production can be time and money intensive, which is why many producers have found success using VAPG to kickstart new or expand existing value-added operations.
This summer without fanfare or a public announcement, the U.S. Department of Agriculture (USDA) made the latest round of awards for the Value Added Producer Grant (VAPG) program. Combining fiscal year (FY) 2019 and FY 2020 mandatory farm bill funding with FY19 and FY20 discretionary funding allowed RD to provide nearly 350 farm businesses in 44 states and Puerto Rico with assistance totalling over $61 million.

VAPG Basics

Originally created in the early 2000s, during another time of low commodity prices, the VAPG has been a critical tool in helping family farmers and ranchers diversify their operations, be less dependent on commodity markets and become price-makers instead of price-takers. 

Now a subprogram of the newly created Local Agriculture Market Program (LAMP), VAPG 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 expand value-added producer-owned businesses. Priority is given to projects that increase opportunities for small and mid-sized family farms, and/or for beginning, veteran, and socially disadvantaged farmers and ranchers.

Producers may request up to $75,000 for VAPG planning grants and up to $250,000 for implementation/working capital grants; however the program requires applicants to provide a substantial cash and sweat equity match in order to receive assistance.

VAPG Awards

(Editor’s note: USDA provided relatively little information about the awards for this combined FY19 and FY20 round of funding making it difficult to provide the kind of analysis we have in the past.

This summer USDA awarded 249 farm businesses in 44 states and Puerto Rico with $61.4 million in VAPG grants. A full list of those businesses that received funding can be found here. The following are four examples of independent producers that have been able to use the program to diversify their operations, create value-added products, and reduce their dependence on traditional commodity markets by tapping into new, potentially lucrative customer bases:

B&E’s Trees is a certified organic maple syrup producer in the Driftless Region of SW Wisconsin.  B&E’s Trees were awarded a $250,000 Working Capital Grant to help market their 2 Year Bourbon Barrel Aged Maple Syrup by highlighting customer uses beyond the breakfast table, specifically in culinary & cocktails/mocktails.  The funds will be used to create branding & marketing material, develop recipes & promote new uses, as well as hire sales support that would otherwise not be able to invest in.  

“VAPG is providing us the opportunity to expand awareness of non-traditional maple market segments and the diverse uses of maple syrup.  This helps increase marketing opportunities for other maple producers to develop unique products and compete on innovation & customer experience instead of cost alone.”

B&E Trees

Black Radish Creamery / BRC Farm, located in Columbus, Ohio, was awarded a $250,000 Working Capital grant to increase their local marketing opportunities and awareness of their artisan products in Central Ohio. The funds will go to solidifying their presence in the region through direct marketing strategies. With the initial experience coming from the best stocks to buy for beginners, they hope to invest in the development of an app to boost their online presence “and reach in our local market”. The remaining funds will be used to update packaging to make it look more user friendly, address food safety costs, and support labor wages for direct sale venues and farmers markets. 

“VAPG is going to springboard us “at least” three to five years into the future to support our local regional food systems. The work without the grant would certainly take much longer. Getting the opportunity to accelerate the growth of our business is huge for us. The cheese we produce adds to the culture of Ohio– ingraining our product into “and creating products that are accepted by” the local food scene adds to the “culinary culture of our area.

Once COVID hit, we didn’t have to change much because “our pre-COVID  focus was already” the local market. We had our best season ever at the farmers markets, to the point where we were able to open our farm shop. It’s paying for our people to work the farmers market. We hope the grant can provide us with the funding to continue building our capacity with marketing . With these funds, we’re now able to support our 5th generation dairy farmer with the equivalent of almost 3x commodity pricing on our milk”, “many local ancillary business” partners, “and a growing team of workers earning a living wage or better!”

BRC Farm

Working Cows Dairy / Venture Milk in Slocomb, AL received a $250,000 VAPG to help us expand their line of Organic, Grass Fed, Animal Welfare Approved dairy products in the Foodservice sector. Working Cows Dairy will utilize the funding to help purchase the raw materials needed such as bottles, labels, caps as well as help cover labor cost and distribution cost associated with getting products to its customers.

“We are excited to have been awarded the VAPG and where it will take us. Taking on projects such as this would not be possible without the help of the VAPG and it will also help us build on our goal of creating a grass fed dairy economy in the South.”

Jonny De Jong, Working Cows Dairy

Ayers Family Farm LLC, located in Shelbyville, Tennessee received  $24,000 USDA-RD, Value Added Producers Grant. This is a planning grant to fund a feasibility study. There are two landowners involved with this effort, including the Ayers family. In Tennessee, several hardwood timber tracts have been cut over numerous times and as a result contain low grade species and timber. This study will quantify hardwood lumber niche markets, and determine if marketing wood products manufactured with lower grade species and trees is viable.

“There are several hard wood timber tracts that contain low grade timber. This is a result of multiple timber harvests over generations that only sell high value species. Some of the trees remaining in these wood lands need removal, this will increase the viability the forest.  This study will quantify markets and determine the profitability of niche market lumber and wood products, from the Ayers and similar timber tracts. The focus will be on those species and trees that at present, have minimal value.”

Van Ayers

Next Steps, Biden-Harris Transition

Stakeholders from nearly every industry are wasting no time in making sure their priorities are at the top of an ever growing to-do list for the incoming Biden-Harris Administration. Over the past year, the National Sustainable Agriculture Coalition (NSAC) has been working with our members from across the country to identify the most pressing issues facing the sustainable agriculture community as well as recommended action items that we believe the next Administration must prioritize in order to rebuild our food system. Learn more about our recommendations here

Those pressing issues and recommendations include critically important ways in which the VAPG program can be improved. The most important of those recommendations is to fully implement the changes made to the program in 2018 Farm Bill by moving forward with developing and finalizing a new interim final rule, that includes stakeholder input, in time for a fall or winter 2021 application.

The 2018 Farm Bill authorized the financial assistance for “expenses relating to costs incurred in obtaining food safety certification and making changes and upgrades to practices and equipment to improve food safety.” This language was included in LAMP as a new “eligible activity” for VAPG grant projects. The 2018 Farm Bill also included a $6,500 cap on the amount per grant that can be used to purchase or upgrade equipment to improve food safety. However, these resources have not been available to producers because the USDA has not yet moved forward with the necessary rulemaking to implement the new authority. 

VAPG has historically been administered with two options: “planning/feasibility grants” and “working capital grants.” NSAC has recommended USDA use the 2018 Farm Bill to create a third option – “food safety financial assistance.” A third option would allow producers just seeking food safety assistance to apply for food safety financial assistance only. 

In addition, to implementing the aforementioned food safety financial assistance option, a new rulemaking for the program is needed to implement other needed changes in the underlying rule:

  • Priority Categories – the statutory priorities are “(I) beginning farmers or ranchers; (II) socially disadvantaged farmers or ranchers; (III) operators of small or medium sized farms or ranchers that are structured as family farms; or (IV) veteran farmers or ranchers.”  In developing a new rule for the program, USDA must provide a far more substantial number of ranking points in the peer review process criteria for each of these priorities than in the old rule. The outcome of annual grant funding should be an overall grant portfolio where the overwhelming number of projects is responding directly to these priorities.
  • Underserved Producers – the 2018 Farm Bill makes a very important addition to the priorities for beginning, socially disadvantaged, and veteran farmers and small and medium sized family farms more generally.  The exact language reads that applications that “are submitted by or serve” (emphasis added) the priority categories count as fulfilling the priorities. The statute goes on to clarify that “(ii) in the case of an application submitted by an eligible entity described in any of subparagraphs (B)(ii) that provide the greatest contribution to creating or increasing marketing opportunities for procurers described in subclauses (I) through (IV) of clause (i).” In other words, in the review process, the peer reviewers are to make a determination, based on the documentation presented in the proposal, as to which projects make the greatest contribution to serving the priority categories, and award more points for those making the biggest contribution.  The rule must be amended to match this critical clarification made in the 2018 Farm Bill, and the directions sent to everyone involved in peer review should reflect this important change.

NSAC looks forward to working with the Biden-Harris USDA in improving the functionality of VAPG and working with members of Congress to continue to prioritize funding for this proven and effective rural economic development program.  

Categories: Beginning and Minority Farmers, Carousel, Farm Bill, General Interest, Grants and Programs, Local & Regional Food Systems, Marketing and Labeling, Rural Development

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