Value Added Producer Grants Program Fact Sheet

What is the Value Added Producer Grant Program?
The Value-Added Producer Grant Program (VAPG) is a competitive grants program administered by the Rural Business Cooperative Service at USDA to help producers move into value-added agricultural enterprises. The program was first created under the Agricultural Risk Protection Act of 2000. It was then expanded and improved under the 2002 Farm Bill and has now been improved even further under the 2008 Farm Bill. This program aims to provide planning and/or capital investment for value adding enterprises started by farmers and ranchers. 

See USDA's new Navigation Tool for the Value-Added Producer Grants program here.

To be eligible for grant funding, applicants for a Value-Added Producer Grant program must meet fairly strict requirements that will be outlined in the Notice of Funds Available (NOFA). If you are an independent producer, a farmer or rancher cooperative, agricultural producer group, or a majority-controlled producer-based business venture, you are eligible to apply for a value-added grant. The NOFA will provide definitions for each of these categories, along with other requirements of the program. A new NOFA is published each fiscal year and includes any information relating to any particular emphasis they are considering.
Types of grants:
When applying for a grant, applicants must choose between two different types of activities for funding. Funding is available for:        
 1) Developing feasibility studies or business plans, which include marketing plans, or;
 2) Working capital to operate a value-added business or alliance.
Applicants are eligible to apply for only one of these two types of grants each grant cycle.
Grant funds may not be used for repair, acquisition, or construction of a building or facility or to purchase, rent or install fixed equipment. Cash and/or in-kind matching funds are required, must be at least equal to the amount of Federal funds awarded, and must be expended in advance, such that for each grant dollar advanced, an equal amount of match shall have been expended first.
New Program Features and Priorities
The 2008 Farm Bill made some positive changes to this program. Those changes include:
  • An expanded definition of value-added to include locally-produced agricultural food product
  • New priorities for awarding grants to projects that focus on increasing opportunities for the following: Small and mid-size family farmers and ranchers; Beginning farmers and ranchers; Socially disadvantaged farmers and ranchers.
  • Grants for projects that help farmers and ranchers establish marketing partnerships that are equitable for all parties involved. This is called “mid-tier value chains.” This will help those mid-size farms that are too large to market directly but too small to be profitable selling raw commodities.
·         20% of the total funding (10% for each) will be set-aside for projects from the following: Beginning or socially disadvantaged farmers and ranchers; and mid-tier value chains.
·         USDA will now be offering a simplified application form and process for small projects requesting less than $50,000. Many of the smaller grants are single farmer projects or lower cost feasibility studies, for which larger-scale working capital applications are unnecessarily complex.
Status of the Program
USDA issued a proposed rule for this program in October of 2008 and public comments were due in December of 2008. The proposed rule fell short in addressing some of the changes made to the program in the 2008 Farm Bill. Hopefully, the public comments will encourage them to revise the rule to better reflect the farm bill changes. Once the department finalizes the rule, they will publish a NOFA for the 2009 funding cycle. Any changes to the program rules will be spelled out in the new NOFA.
Matching Funds
The program requires a one to one match. A cash match is defined as actual funds dedicated to the project. An in-kind match includes time, equipment, space, staff salaries, etc.   Examples of a cash match might be: third party contributions from groups, farm organizations or individuals donating cash towards a project; the salary of a person or persons working on a project (cash transaction); travel expenses to attend meetings or participate in training sessions; state appropriations or non-federal funds that have not been spent; bank financing; revolving loan funds; or county financing.
Examples of in-kind contributions include: space; equipment; supplies, copies, telephone and other expenses which are dedicated to the project; volunteer time/unpaid services provided to a recipient by an individual or employee working on a project ( non cash transaction); value of hours of non-federally funded personnel assisting with project, e.g. State Dept. of Agriculture, local economic development agencies, volunteer board members, etc; donation of office space or meeting rooms; or donation of inventory including equipment or buildings.
Types of Valued-Added Activities Eligible for Grants
Commodity Processing
Market Differentiation
Commodity Segregation
On-Farm Renewable Energy
Local Food
Mid-Tier Value Chain
Increasing value by changing commodity’s physical state
Increasing value by marketing the commodity’s special identity or character
Increasing value by keeping the commodity physically apart in production and distribution
Realizing value by transforming natural resources into energy on the farmstead
Increasing value by aggregating and marketing food for local markets
Increasing value by linking farmers with local and regional supply networks in which they are equal partners
Examples: wine, flour, cheese, jam, biodiesel
Examples: organic, grass-fed, humane, state branding
Examples: GMO-free, no-rBGH, Varietal purity
Examples: wind, solar, geothermal, on-farm biodiesel
Examples: buy local - buy freah, community based food enterprises, supplying local procurement preferences
Examples: farm to institution, farm to food service or restaurant, value chain using a consumer seal
Planning or working capital
Planning or working capital
Planning or working capital
Planning or working capital
Planning or working capital
Planning or working capital
Examples of Past Grant Recipients
Nebraska Small Farms Cooperative, O'Neill, Nebraska
The Nebraska Small Farms Cooperative received a $250,000 grant in 2004 to expand its product line and market overseas. The coop has grown from 29 farmers/members in 2004 to over 90 today. It markets pre-cooked, USDA verified, non-hormone treated meat to businesses in the U.S. and Europe. Not only has the coop passed value-added profits back to farmers, but its success has also spilled over to a local meat processing plant as annual processing contracts were signed to benefit both parties.
Pinn-Oak Ridge Farm, Delavan, Wisconsin(
In 2005, Steve and Darlene Pinnow received a $150,000 grant to brand and direct market their pasture-raised lamb. It has allowed them to expand their market from 40 restaurants and grocery stores to 60 retailers in Wisconsin and Illinois. The Pinnows are now working with a distributor in Chicago who learned about their pastured lamb from the USDA announcement of their VAPG grant.
Ives Cream, Norwich, New York
The Ives family operates a sustainable dairy farm that has been handed down through six generations. With the help of a $47,550 VAPG grant in 2004, they planned and executed a successful marketing campaign for their premium ice cream. Today, they operate a seasonal retail ice cream parlor in downtown Norwich, NY where great locally-produced ice cream, customer service, and a community focus have proven to be a winning business combination.
Prairie Pride, Inc., Deerfield, Missouri (
This new-generation, producer cooperative that will be converting soybean oil into bio-diesel fuel with the help of a $300,000 working capital grant in 2006. The new facility will ultimately crush 21,000,000 bushels of soy beans per year to obtain soy oil.  The refinery will then convert that soy oil into 30,000,000 gallons of bio-diesel.
How Do I Start?
We strongly recommend that you locate a resource person in your county, state or region that can give you some professional advice on your grant application, as well as your business ideas. We have provided some contacts in our resource guide that are organized by state.
The most recent information on funding availability and applications is available through your state USDA Rural Development Office.
Now is a good time to check with your state office or your state’s Department of Agriculture about recent news or upcoming workshops about the program. They can provide information, applications and guidance on when and how to apply for a grant. Set up a meeting with your USDA Rural Development office and educate them about your project and ask them for information about the program.
Other sources for information regarding value-added enterprises or how to apply for a VAPG can be found at:  

1) Farmers’ Guide to Applying for Value-Added Producer Grant (VAPG) Funding for the Fiscal Year 2012 Grant Cycle, a publication from the National Sustainable Agriculture Coalition.

2) The Agriculture Marketing Resource Center This website offers a broad range of information on value-added, direct marketing initiatives. Through links to Innovation Centers around the country at the state level, the website makes available information on a broad range of issues. 
3) The University of Nebraska offers a template of the grant proposal, which is helpful in completing the financial reporting requirements in the application. That template is available here.
USDA Contact Information and Online Resources
USDA website for the VAPG Program:
An online assessment tool is available at that will assist you in determining whether or not you are eligible to apply for a VAPG grant.
Tracey Kennedy, USDA VAPG Program Manager, 202-690-1428.


Get The Newsletter?