Value Added Producer Grants Program (VAPG)

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The Value-Added Producer Grant Program (VAPG) is a competitive grants program administered by the Rural Business Cooperative Service of USDA to help producers expand markets for, and increase their profitability through value-added agricultural enterprises.

The program makes small and mid-size family farmers and ranchers, as well as beginners, a priority for funding by giving those applicants extra points in the ranking process. Eligible applicants for the VAPG, include independent farmers or ranchers, farmer owned cooperatives and producer groups.

Example

Building Community and Providing Economic Opportunity

St. James Marketplace, located in a historical, old schoolhouse in St. James, Nebraska, received a VAPG planning grant to develop a business plan, feasibility study, and to pay for legal expenses associated with forming the market.

Five women formed a non-stock cooperative (pictured from left to right, top row: Louise Guy, Mary Rose Pinkleman; bottom row: Jeanett Pinkleman, Violet Pinkleman and Vicki Koch) and created the St. James Marketplace to preserve their farm community after learning the Omaha Diocese was closing their Catholic Church.

The Marketplace is a retail outlet for more than 60 producers in northeastern Nebraska. It includes a farmers market, home-made crafts and many other products. There is a tea room and a history room. The women recently licensed the kitchen and host many dinner events as well as make products to be sold at the Marketplace, such as jams, jellies and pastries.

St. James, located 1/4 mi off of Scenic Nebraska Highway 12, was at one point removed from the map. The women of St. James Marketplace wondered how anyone would find them if they could not find their community on the map. So while they were forming the Marketplace, they made their case to the Nebraska State Legislature and literally got themselves on the map!

The VAPG grant has made this Marketplace a dream a reality and helped them rebuild and even broaden their community.

How Does It Work?

The VAPG offers two types of grants – business planning and working capital grants to help farmers and ranchers create and move into value added agriculture. Grants are for a maximum of three years.

  • You can apply for one or the other but not both in the same year. If applying for a working capital grant, applicants must have conducted a business plan and a feasibility study, as well as demonstrate that they are currently in a position to market the subject value-added product and carry out the activities in accord with the work plan and budget timeline.

Eligible Planning Grant Activities ($75,000 maximum grant)

  • obtain legal advice and assistance related to the proposed venture
  • work with a third party to conduct a feasibility study of the proposed venture to determine its potential marketing success
  • develop a business plan that provides comprehensive details of the management, planning, and other operational aspects of the proposed venture
  • develop a marketing plan for the venture, including identification of a market window, potential buyers, a description of the distribution system, and possible promotional campaigns

Eligible Working Capital Grant Activities ($200,000 maximum grant)

  • design or purchase an accounting system for the venture
  • pay for salaries, utilities and rental of office space
  • purchase inventory, office equipment and supplies
  • conduct a marketing campaign for the value added product

What is an Eligible Value-Added Project?

There are five eligible value added methods (listed below in the chart). The proposed project must include one of these methods and result in an expansion of customer base AND an increase in revenue returns to the applicant agricultural producer(s).

Types of Valued-Added Projects Eligible for Grants

Five Methods for Adding Value Under the VAPG Program Definition Example
1) Commodity Processing Increasing value by changing commodity’s physical state wine, flour, cheese, jam, biodiesel
2) Market Differentiation or non-standard production method Increasing value by marketing the commodity’s special identity or character organic, grass-fed, humane, state branding
3) Commodity Segregation Increasing value by keeping the commodity physically apart in production and distribution GMO-free, no-rBGH, Varietal purity
4) On-Farm Renewable Energy Realizing value by transforming natural resources into energy on the farmstead wind, solar, geothermal, on-farm biodiesel
5) Local Food Increasing value by aggregating and marketing food for local markets – must be within 400 mile radius. buy local - buy fresh, community based food enterprises, supplying local procurement preferences

How Much Funding is Available?

  • Approximately $18 million annually
  • 10% of funds are reserved for applications submitted by beginning farmers or ranchers, and socially disadvantaged farmers or ranchers
  • 10% of funds are reserved to fund Mid-Tier Value Chain/Local and Regional Supply Network projects
  • Matching funds are required and must equal the amount of the grant requested. However, matching funds may also come from in-kind contributions but there are limits to what qualifies for in-kind match.

Important Definitions

  • Family Farm: Produces agricultural commodities for sale in sufficient quantity to be recognized as a farm and not a rural residence, owners are primarily responsible for daily physical labor and management, hired help only supplements family labor, owners are related by blood or marriage.
  • Mid-Tier Value Chain/Local and Regional Supply Network: Interconnected food-related business enterprises through which food products move from production through consumption in a local or regional area of the USA.
  • Medium-Sized Farm or Ranch: Three year average of between $250,001 and $700,000 in annual gross sales of agricultural products.
  • Small Farm or Ranch: Three year average of $250,000 or less in annual gross sales of agricultural product.
  • Beginning Farmer: (1) Have operated a farm or a ranch for not more than 10 years; (2) materially and substantially participate in the operation of the farm or ranch; and (3) provide substantial day-to-day labor and management of the farm or ranch. Applicants must currently own and produce more than 50 percent of the agricultural commodity to which value will be added.
  • Socially Disadvantaged Farmer or Rancher: (1) A person that is directly engaged in farming or ranching, or an entity solely owned by individuals who are directly engaged in farming or ranching that; (2) as a farmer or rancher person or entity, is a member of a socially disadvantaged group, whose members have been subjected to racial, ethnic, or gender prejudice because of their identity as members of a group, w/o regard to their individual qualities; and (3) in the event that there are multiple farmer or rancher owners of the applicant organization, at least 51% of the owners are members of said socially disadvantaged group.

How are Grants Awarded?

Reviewers award points based on established criteria as presented in each funding announcement.

Ready to apply?

Grant applications are due July 7, 2015.  And sign-up for the Center for Rural Affairs Newsletter to keep up with developments!

Resources

Farmers’ Guide to Applying for Value-Added Producer Grant (VAPG) Funding for the Fiscal Year 2013-14 Grant Cycle, a publication from the National Sustainable Agriculture Coalition.

USDA Rural Development website includes a link to the 2009 funding announcement that you can look at to see what they look like and what is involved.

The Nebraska Food Processing Center provides grant assistance and they have a very useful template on their website for the VAPG program.

USDA's Know Your Farmer Know Your Food website includes information about the VAPG program, as well as other programs that can work together to create local and regional market opportunities for farmers and ranchers.

News and Stories

See St. James Marketplace in the news on their website.

Learn More

Call Cora Fox at 402.687.2100 ext. 1012 or email her at coraf@cfra.org