Value Added Producer Grants


 Helping farmers create and expand value-added products and enterprises

When farmers and food entrepreneurs take raw agricultural products like fruits or grains and turn them into a lightly processed product (e.g., pickles, jam, bread, cheese) they are creating “value-added” products. These value-added products can bring in a higher consumer price than the raw product alone, which helps farmers and ranchers improve their bottom lines. The development of value-added products also contributes to community and rural economic development as new and expanded jobs are created to support the production, packaging, and sale of these transformed foodstuffs.

The Value Added Producer Grant (VAPG) program provides competitive grants to individual agricultural producers, groups of independent producers, producer-controlled entities, 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, improve food safety practices, or to acquire working capital to operate a value-added business venture or alliance.

Learn More About VAPG:  

Program Basics

VAPG is a competitive grant program administered by the Rural Business-Cooperative Service of the U.S. Department of Agriculture (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 any of the following:

  • 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, local)
  • 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)
  • 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 economic planning and feasibility studies, provide needed working capital for value-added business ventures or cover expenses relating to obtaining food safety certification and making practice and equipment upgrades to improve food safety.

There are two types of grants currently available through 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.
  • 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.

In general, working capital requests of $50,000 or more must be supported by an independent feasibility study and business plan. However, for a proposed market expansion for (an) existing value-added agricultural product(s) that has (or have) been produced and marketed for at least 2 years, a business or marketing plan may be submitted instead of a feasibility study. There is a simplified application for working capital requests of less than $50,000.

Among other things, grant funds may not be used for repair, acquisition, or construction of a building or facility or to purchase, rent, or install fixed equipment.  A list of ineligible uses of grant funds is outlined more specifically in the program’s regulations.

All grant funds awarded must be matched with non-federal funds 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 (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 portion of the match must be in cash. Matching funds, both cash and in-kind must be secured in full at the time an application is submitted.

Eligibility 

Entities eligible to apply for VAPG funds include:

  • Independent, individual agricultural producers
  • Groups of agricultural producers
  • Majority-controlled producer-based business ventures
  • 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 the majority (more than fifty percent) 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 grants to these entities cannot make up more than 10 percent of total awarded funds in any given year.

The Program in Action

Whether enabling organic grain producers to tap into into local and regional markets or supporting the development of a producer-owned cooperative food hub, VAPG has helped thousands of farmers around the country expand their customer bases and incomes through the development and/or expansion of value-added businesses.

In 2018, a study by USDA’s Economic Research Service found that businesses that received support from VAPG were less likely to fail than similar businesses that did not receive support through the program. Furthermore, the report found that VAPG recipients were 89 percent more likely to still be in business two years after the grant than similar, non-granted businesses, and 71 percent more likely to remain in business four years after the grant. Moreover, on average VAPG recipients were reported to provide more jobs (five to six more employees) for their communities than similar non-recipient businesses.

The following are examples of projects that family producers were able to undertake thanks to the support of VAPG:

  • In 2018, The Mill at Janie’s Farmwas awarded a working capital grant to expand regional marketing and sales and assist in ongoing new product development. The Mill at Janie’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 Janie’s Farm Organics and other family farmers in the region.
  • In 2018, Doudlah Farms, in Wisconsin, was awarded a working capital grant to support branding and selling their organic beans and grains into regional markets. Over the last ten years, owner Mark Doudlah has been transitioning his conventional crop fields to organic, and as part of that process, has developed innovative production practices that he shares with other farmers at conferences across the country. Now with 1,800+ 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 newly branded products.
  • In 2018, The Moo-Thru, LLC was awarded a working capital grant to support operational costs, hiring of labor, and the development of a new website. Located in rural Virginia, The Moo-Thru is an ice cream and dairy products store that was started in 2010 by a fourth generation dairy farmer as a creative way to get into the direct-to-consumer retail business. The Moo-Thru’s slogan is “Real ice cream from real dairy farmers.”
  • In 2015, Ludwig Farmstead Creamery in Illinois received a working-capital grant to assist production and marketing of their artisan cheeses made with milk from their herd. Ludwig Creamery markets most of their products direct to consumers through farmers markets, restaurants, retail outlets and wineries in Illinois and Indiana.
  • In 2013, the Wisconsin Food Hub Cooperative, a farmer-led cooperative owned by the producers and the Wisconsin Farmers Union, 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 Wisconsin Food Hub Cooperative subsequently received a second working capital grant in 2015 to expand marketing and sales of produce throughout the region.

Learn more about how VAPG is helping to provide new and increased marketing opportunities for farmers, spurring rural economic development, and providing consumers with more food choices by checking out the Agricultural Marketing Resource Center’s website. The site contains lots of worthwhile information on the program, as well as a series of video vignettes of producers who received VAPG grants explaining how impactful the program has been for their farms in their own words.

Full lists of recent Value-Added Producer Grant award recipients can be found at the links below:

Also, check out NSAC’s Local and Regional Food Systems Blog to learn more about how VAPG is helping to provide new and increased marketing opportunities for farmers, and for additional news and resources on VAPG and other relevant programs, including funding announcements.

How to Apply and Program Resources

Each year, USDA’s Rural Business-Cooperative Service publishes a Notice of Solicitation of Applications (NOSA) in the Federal Register, which opens the solicitation for applications from eligible producers and groups of producers to apply for value-added producer grants. There is no set timeframe for when the NOSA is typically released. Usually, applicants have 60 to 90 days to apply and submit their applications to USDA.

Proposals must be submitted electronically via www.grants.gov or in person of via mail to your USDA Rural Development State Office. Typically, the deadline for submitting online through grants.gov is different than the deadline to submit directly to a state office.

All applications, whether submitted online or directly through the Rural Development State Office, are first reviewed by the Rural Development State Office for completeness and eligibility. They are next sent to grant review panels to be evaluated and ranked. USDA staff in Washington then conduct a final review to assign any additional administrative priority points.

A listing of USDA’s Rural Development State Offices websites, which include contact information, can be found here.

By law, there are three 10 percent funding set-aside categories: 1) mid-tier value chain projects; 2) projects that benefit beginning or socially disadvantaged farmers or ranchers; and 3) projects in persistent poverty counties. These set-asides are intended to ensure that these priorities are more likely to be supported in funded grants. Funding for food safety assistance within VAPG is capped at 25 percent of the total funds made available in any given year.

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 additional priority 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.

To assist producers in determining if the program is good fit for them, each year NSAC publishes a “Farmers’ Guide to Applying for Value Added Producer Grant Funding.

The following websites include additional information about VAPG and the application process:

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 was 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, but its funding was cut dramatically to $15 million for all five years of the bill. The 2008 Farm Bill also established funding set-asides for mid-tier value chains and beginning or socially disadvantaged farmers. Additionally, the 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 reauthorized and expanded VAPG by adding veteran farmers and ranchers as a new, fourth priority category and provided the program with $63 million in mandatory funding for 2014-2018.

The 2018 Farm Bill reauthorized VAPG through a new umbrella program, the Local Agriculture Market Program (LAMP), which combined VAPG with the Farmers Market and Local Food Promotion Program (FMLFPP). Although VAPG now has permanent mandatory funding as part of LAMP – a major victory for NSAC and our allies in the local/regional food community – VAPG funding levels are still a fraction of what they were under the 2002 Farm Bill. The 2018 Farm Bill provides LAMP with $50 million in mandatory funding per year, of which only $17.5 million is for VAPG.

VAPG’s mission, grant priorities, and activities are expected to remain largely as they were during the 2014 Farm Bill – with a few notable changes:

  • Up to 25 percent of total VAPG funds can be used to support producer costs related to changing and/or upgrading food safety practices and related equipment ($6,500 maximum grant).
  • Priority set-aside funds will be available until the end of the fiscal year (rather than needing to be used by June 30th of each fiscal year.

Value Added Producer Grants Program Funding

Fiscal Year Total Mandatory Funding Available (in millions)
2019 $17.5
2020 $17.5
2021 $17.5
2022 $17.5
2023 $17.5
5 yr total $87.5
10 yr total $175

Please note: The funding levels in the chart above show the amount of mandatory funding reserved by the 2018 Farm Bill for this program to be provided through USDA’s Commodity Credit Corporation. However, Congress does at times pass subsequent appropriations legislation that caps the funding level for a particular year for a particular program at less than provided by the farm bill in order to use the resulting savings to fund a different program. Therefore, despite its “mandatory” status, the funding level for a given year could be less than the farm bill dictates should the Appropriations Committees decide to raid the farm bill to fund other programs under its jurisdiction. VAPG is also subject to automatic cuts as part of an annual sequestration process established by the Budget Control Act of 2011.

Recent Appropriations Funding for VAPG

Fiscal Year Appropriated Annual Funding (in millions)
2015 $10.75
2016 $10.75
2017 $15.0
2018 $15.0
2019 $15.0

In addition to mandatory funding, Congress also regularly appropriates annual discretionary funding for VAPG. The appropriated amounts for recent years are shown in the table above. 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.

For the most current information on program funding levels, please see NSAC’s Annual Appropriations Chart.

Authorizing Language

Section 10102 of the Agriculture Improvement Act of 2018 amends Subtitle A of the Agricultural Marketing Act of 1946 by adding Section 210A to the end, to be codified as 7 U.S.C. 1621 et seq.


Last updated in May 2019.