Some Long-term Thoughts on the VAPG Program

Posted on 01/27/2014 at 12:00 AM by Christa Hartsook

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

As I wait on my group of grants to review for the VAPG program this winter, my graduate student has put the finishing touches on his Master’s degree thesis looking at the VAPG program over time. He updated a similar thesis done while I was on faculty at Kansas State University (for a summary of that work, see http://ageconsearch.umn.edu/handle/90660). The goal of that study classified each grant for which we could find public data in one of the nine steps of business development. These were:

  • Creation of idea,
  • Formation of idea into written form,
  • Formation of an organizational structure for the idea,
  • Hiring of employee(s) for the idea,
  • Conducting equity drive to raise capital for the idea,
  • Formation of physical structure for the idea,
  • Creation of the idea into a product or service,
  • Creation of the idea into a distributable product or service, and
  • Whether the product or service was sold in March 2007.

That study had found that market share was found to be an important determinant of VAPG success. Size variables, including greater sales and increased grant dollars, as well as a lower number of producers, were also determinants of business success in reaching the last step. In addition, agricultural producer groups such as trade associations that were composed of producers or cooperatives had a lower probability of seeing an idea through fruition. Many of those activities were market studies. Thus, this result may not be so surprising. Grants that were categorized as dairy, flower, fruit, nuts, specialty meats, wheat, and wine were found to have a greater likelihood of having ideas taken to fruition.

That study use data for 2001 to 2005. My current graduate student used data through 2012. Using a similar process, we used public data to categorize what stage of business development the product or service was in. As in the first study, there were no “earthshattering results.”

Some overall observations included:

  1. The number of grants that reached the last step in business development of having a product or service being sold was significantly greater than prior to 2006 with over half the recipients reaching that step,
  2. The geographic diversity of grants with regard to state and territory was much broader after 2005 which likely reflects individual state efforts and USDA efforts to promote the program nationally,
  3. Greater increase in the number of grants in the differentiation category,
  4. Greater success was found for recipients who were already producing a value-added product and looking to extend their product line or mix rather than starting from “scratch,” and the independent producer category of recipients has greatly increased. 

The findings of this thesis showed that the dollar amount of the grant size, as in the first study, had significant impacts on a VAPG recipient being successful or reaching step nine of the nine step business process.  In addition, corn, edible beans, fruit, small grains, sugar, wheat, wine, wind, and poultry were found to have a higher probability of success. The newest addition to the VAPG programs allotments, Mid-Tier Value Chains, had a positive and significant relationship to a producer obtaining the ninth step. It should be noted that the number of Mid-Tier grants was small.

I have reviewed this program every year since it first started and it is interesting from an academic perspective. The program was originally a one-time program and after it was authorized and then funded through appropriations, the infrastructure has been built dramatically. Many of my peer departments have an individual involved in some aspect of business development, rural entrepreneurship, or something similar. State agencies have ebbed and flowed with regard to funding or moving resources around in the area of business development. But overall, as information about the program has evolved, the likelihood of success has increased.
 

Categories: Grants