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Value-Added Agriculture: Creating New Opportunities in an Era of Uncertainty

September 27, 2018

USDA will see significant cuts to its value-added agriculture programs, which support small rural business, if congress does not approve a new Farm Bill or a 2014 Farm Bill extension. Photo Credit: USDA

Value-added business investments help farmers expand their operations, create jobs, and enhance their communities. Photo Credit: USDA

Long before the Trump trade war was propelling the agriculture economy into new realms of uncertainty, many producers were already struggling with persistently low commodity prices.

Under the yoke of a depressed agriculture economy, a growing cadre of family farmers have found success with value-added agriculture and tapping into growing markets for organic and local and regional food and farm products.

Originally created in the early 2000s, during another time of low commodity prices, the Value Added Producer Grant Program (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.

Earlier this summer the U.S. Department of Agriculture (USDA) quietly made the latest round of awards for the program, combining fiscal year (FY) 2017 and FY 2018 funding to provide 248 farm businesses in 47 states and Puerto Rico with $36.4 million in VAPG grants.

Authorized and funded through the Farm Bill, VAPG is a popular program that routinely receives far more applications than the program has resources to support.

Sadly, at a time when family farmers and ranchers are desperately in need of new tools to address risk and diversify their operations, the future of VAPG is twisting in the wind.

An Uncertain Future for VAPG

A recent Economic Research Service study, released earlier this year, demonstrated what many producers and sustainable agriculture advocates already knew – VAPG is an effective tool for supporting farm viability, job creation and fostering the entrepreneurial spirit.

Despite the success of the program and the need for new tools to help producers diversify their operations and manage risk, especially in context of the ongoing trade disruptions, the future of VAPG is uncertain.

Negotiations around the 2018 Farm Bill are currently deadlocked due to disagreements between House Agriculture Committee Chairman Mike Conaway (R-TX) and Senate Agriculture Committee Chairman and Ranking Member Pat Roberts (R-KS) and Debbie Stabenow (D-MI), the latter two of whom continue to work together to advance a full, fair farm bill. It is now looking quite likely that Congress will allow the farm bill to expire without bothering to pass a short-term farm bill extension.

A lapsed Farm Bill will be highly problematic for VAPG because farmers and ranchers have already used all of the mandatory funding provided by the 2014 Farm Bill (a total of $63 million). This means that no farm bill funding will be available for the program unless the new farm bill (or a farm bill extension) provides it. We expect available dollars for the program to be cut by at least 50 percent in the absence of farm bill funding. Fortunately, the program will not come to complete hault because, in addition to its farm bill funding, it receives a limited amount of discretionary funding through the annual appropriations process. However, without the significant investment of mandatory funding through the farm bill, USDA’s capacity to help family farmers and ranchers develop and tap-into new markets will be severely limited.

VAPG Awards

(Editor’s note: USDA provided relatively little information about the awards for this combined FY17 and FY18 round of funding making it difficult to provide the kind of analysis we have in the past.)

Administered by the USDA Rural Business Cooperative Service (RBCS), VAPG provides competitive grants to individual independent agricultural producers, groups of independent producers, producer-controlled entities, producer associations, 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, feasibility studies, or to acquire working capital to operate and expand a value-added business venture or alliance.

This summer RBCS awarded 248 farm businesses in 47 states and Puerto Rico with $36.4 million in VAPG grants. The following are three 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, lucrative customer bases:

  • The Mill at Janie’s Farm was awarded a $90,000 working capital grant to expand regional marketing and sales, and assist in ongoing new product development. The Mill at Jaine’s Farm is an outgrowth of Janie’s Farm Organics a family farm in central Illinois that raises organic corn, soybeans, wheat and oats on over 2,400 acres of USDA Certified Organic cropland. The Mill at Janie’s Farm is milling and marketing both grains grown by Jaine’s Farm Organics and other family farmers in the region.
  • Doudlah Farms, in Wisconsin, was awarded $189,730 grant to support branding their own organic beans and grains, and begin selling directly into regional markets. Over the last ten years, owner Mark Doudlah has been transitioning his conventional crop fields to organic, and in the process has developed innovative production practices that he shares with other farmers at conference presentations across the country. Now with 1800+ acres in organic production, Mark and his wife Lucy are partnering with processors, market resources, and retail operations (including CSAs, cooperatives, and others) to sell their new labeled product.
  • The Moo-Thur, LLC was awarded a $250,000 working capital grant to support operational costs, hiring labor and implementation of a new website. Located in rural Virginia the Moo-Thur is an ice cream and dairy products store that was started in 2010 by a 4th generation dairy farmer as a creative way to get into the direct to consumer retail business. The Moo-Thur’s slogan is “Real ice cream from real dairy farmers.”

Much is at stake in the coming days and weeks for VAPG and the farmers, ranchers, and communities who benefit from the program. The National Sustainable Agriculture Coalition will continue to urge Congress to quickly pass a farm bill that includes funding and authority for value-added agriculture as part of the new Local Agriculture Market Program. Stay tuned for regular updates on the status of ongoing farm bill negotiations!

Categories: Farm Bill, Local & Regional Food Systems, Rural Development

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