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Are you Considering a Value-Added Agriculture Enterprise?

Farm Business Management Update, April/May 2005

By Keith Dickinson, Extension Agent, Farm Business Management, Northern District

The term "Value-Added" is getting a lot of use these days. In agriculture, this term refers to the processing or modification of a farm product to add value to it. Examples might include a beef cattle farmer who decides to finish and slaughter her cattle and sell beef, rather than selling the live animal as a feeder calf. Another example might be a tomato grower who decides to use his tomatoes to make salsa, rather than sell them fresh at the farmer's market. It could even be something as simple as a hay producer who decides to produce high-quality hay in square bales for the equine market, rather than lower quality hay in round bales for the cattle market.

The good news for agricultural producers considering starting a value-added agricultural enterprise is that federal grants are now available to help with the starting of such a business. Authorized in the 2002 Farm Bill, the Value Added Producer Grant (VAPG) Program makes grants to eligible producers and producer groups through the U.S. Department of Agriculture (USDA) division of Rural Development. The primary objective of the VAPG is "to encourage producers of agricultural commodities and products of agricultural commodities to further refine these products increasing their value to end users."

Grants through the VAPG program may be used for planning a value added enterprise through doing feasibility or marketing studies or for working capital for the start up of such an enterprise. A feasibility study or business plan is needed for working capital grants; therefore, if a feasibility study has not yet been performed, a planning grant should be applied for. Both independent producers and producer groups, such as cooperatives, are eligible. However, independent producers must produce at least 50% of the ingredients of the value added product and producer groups must identify the independent producers for whom the study is being performed.

The deadline for applying for the VAPG is May 6, 2005. The complete award notice and application instructions are available from the VAPG website. Anyone interested in applying for a grant should begin soon to draft a well prepared application and to obtain necessary documentation for the project.

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