Blog article written by Dr. Michael Boland, University of Minnesota, boland@umn.edu

The Value Added Producer Grants are due at the end of August and some changes in the application process should facilitate a much easier format for first time applicants. Hats off to USDA for these changes because they have made it even more user-friendly! The forms are easy to follow and very logical if you take the time to carefully go through them. As in past years, questions continue to accelerate until the deadline!  Some of the most frequent questions I am getting this year relate to the definition of an eligible entity. The NOFA states the following:

1. Independent Producers (either individuals or business entities) –farmers, ranchers, foresters, & fishermen who will produce a majority of the commodities to which value will be added & who will retain ownership of the commodities throughout the value-added process. (An informal group of independent producers – a “steering committee” – may also apply under this category. If selected for funding, the steering committee must form a legal, business entity structure before the award can be made.) Two special classes of independent producers are included in this section and share exclusive access to 10% of the total VAPG funds – beginning farmers and ranchers and socially disadvantaged farmers or ranchers. Beginning farmers or ranchers are independent producers who have been farming for less than 10 years. Socially Disadvantaged Farmers or Ranchers are independent producers where the primary person is either a minority or women.
2. Agricultural Producer Groups – representing & controlled by independent producers
3. Farmer or Rancher Cooperatives – consisting exclusively of independent producers
4. Majority-Controlled Producer-Based Business Ventures – legal business entity that is majority-owned and controlled by independent producers.

The easiest way for me to describe an eligible entity is that the governance structure must be comprised of a majority of producers. For example, an LLC is commonly comprised of two individuals in many states. If both have equal equity, then both must be independent agricultural producers.  A three member board would require at least two members be independent producers. Control implies at least a simple majority of independent producers.

An individual who is not a producer but has developed a supply chain that uses producers needs to check for eligibility. While the intent is good, such an individual would not be an eligible entity, unless the producer is part of a mid-tier project. These projects are involved in a local or regional supply network of producers and food businesses that connect producers with consumers by marketing an eligible value-added product. The applicant is required to be one of the four eligible applicant types described above but a mid-tier project involves a network in which the applicant is involved with other entities that are not VAPG-eligible applicants. The network must include at least one ag producer group, cooperative, or business venture that is involved in the marketing strategy. Make sure and read the guidelines carefully on the mid-tier grants.

Remember a “value-added” activity must increase the value realized by a producer for their agricultural commodity by increasing value of the commodity and expanding the market for the commodity – due to any of five activities:
1. Commodity processing – processing that changes the commodity’s physical state (e.g., wheat flour, fruit jam, diced tomatoes, biodiesel, ethanol, fish fillets or wool rugs)
2. Non-standard production method – producing a commodity in a manner that is different from “normal” thereby creating a market identity that increases value (e.g., organic, free-range or natural-fed). This does not include branded products or nonstandard-packaged products. (Note: proposals in this category are only eligible for working capital grants)
3. Commodity segregation – physically separating the commodity from other similar commodities during both production & marketing (more than simple sorting by grade). This includes traceability & identity-preserved systems (e.g., GMO-free commodities or varietal purity).
4. Renewable energy – on-farm production of renewable energy either through the conversion of agricultural commodities or their by-products into energy (e.g., biomass or anaerobic digesters). Wind, solar, geothermal and hydro projects are only eligible when the energy generated will be used to produce a value-added product.
5. Locally-produced – produced & marketed either within 400 miles or within the same state (e.g., locally-grown food).

There is a new category for socially disadvantaged farmer or ranchers this year which is carefully spelled out for eligibility. In addition, there are some new reporting requirements to help USDA verify eligibility for applicants in all categories prior to the grant going into review.

When you are writing your grant, it is critical to get the main idea right upfront so those of us who are reviewing the proposal have a clear understanding of your idea! Let us know if we can help at www.agmrc.org.

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