What is the Value-Added Producer Grant Program?
The Value-Added Producer Grant Program (VAPG) through the USDA is a grant that awards funding for projects that “add value” to an Agriculturally based Operation.
The purpose of VAPG is to provide funds for economic planning activities or eligible working capital expenses:
- To help agricultural producers enter into value-added activities related to the processing and marketing of agricultural products
- To expand markets for, and increase financial returns to agricultural producers
- To strengthen the rural economy
USDA considers “Value-Added” to be projects or activities that fall in the five following categories:
- Change in Physical State. For example:
- milk into cheese
- wheat into flour
- wool into clothing or rugs
- livestock into packaged meat
- Berries into jam
- Produced in a manner that enhances the value of the agricultural commodity
Utilizing agricultural production practices to set the commodity apart from the standard market. This can include (but is not limited to) getting certifications for your operation such as organic certification, food safety certification for specialty crops, and certification for grass-fed beef.
- Product segregation
Keeping your commodities separate, for example:
Keeping GMO corn separated from non-GMO corn on the farm during production and harvesting, with continued separation through marketing.
- Locally Produced Agricultural Food Product
Any agricultural food product that is marketed and distributed within 400 miles of the product’s origin or within the State in which the product is produced. For example:
- Specific local grapes with characteristics attributable to the growing area, sold to a winery that will produce a local wine.
- local produce advertised and sold at a premium as a fresher, locally-produced alternative to non-local produce.
- Farm or ranch-based renewable energy
- Converting dairy manure into methane and electricity generated on the farm
- Turning corn into biodiesel generated on the farm
Unfortunately, projects generating energy from wind, solar, geothermal or hydro sources are not eligible for the VAPG, but there are excellent grant opportunities through the Rural Energy for America Program (REAP), if you are interested in learning more about utilizing solar and hydro energy for your operation!
How can you use VAPG Funds?
Some of the most common uses for VAPG grant funding in the five categories listed above includes:
Processing costs including labor, utilities, packaging, and labeling. For example:
- Funding the costs associated with changing the physical state of your food
- Packaging your product to be market ready
- Creating custom labels for your product
Advertising and promotion
- Creating a website or hiring a professional to build it for you
- Designing a logo for your packaging and creating promotional/marketing items
- Developing Signage for your Ag Operation and custom tents for Farmers Markets
Financial/accounting systems
- Inventory Management
- Risk Management Planning
- Account Management for Profit and Loss
Additionally, there are limitations to what you can use VAPG funding for. VAPG Funds CANNOT be used for:
- The purchase of land, buildings, or equipment
- Preparation of the grant application
- Research and development, architectural or engineering design work
- Production related expenses for harvesting or delivering product to a processing facility
How much VAPG Funding is available?
Approximately $31 million in funding is available for the VAPG program for 2023, and you can apply for the funds in two different ways: Planning Activities, which have a maximum grant amount of $75,000, or Working Capital grants, which have a maximum grant amount of $250,000.
How much you choose to apply for will also determine what is required to be included with your application. If you choose to apply for $50,000 or more, you must have an independent third party conduct a feasibility study for your project and include a business plan. If you apply for $50,000 or less, you can use a simple application.
How do I know if I am eligible for VAPG Program Funding?
You can apply for VAPG Funding if:
- You own and produce at least 50% of the raw commodity used in the project
- You have at least one year’s history of sales from your operation
- You’re an independent farmer that has filed Schedule F Taxes in the past, OR you apply as an agricultural producer group, cooperative or majority-controlled producer-based business venture
If you meet all these requirements, congratulations! Additionally, The USDA may give priority to Producers who are:
- A Beginning Farmer or Rancher, Limited Resource, or Socially Disadvantaged
- Classified as a Small or Medium Sized Farm
- A Ranch structured as a Family Farm
- A Mid-Tier Value Chain
- A Farmer or Rancher Cooperative
Is there a Matching Requirement?
The VAPG program does require a 1:1 funding match from all grant recipients. This means you’ll need to double the amount you’re asking for using your own resources. Luckily, VAPG allows you to use “in-kind” resources to cover up to half of the match requirement. In-kind contributions include non-cash resources such as labor, raw materials, and personal time invested towards the project.
For example, let’s say you’re applying for a $50,000 grant. You’ll need to contribute $50,000 of your own resources towards the project. But, you can use up to $25,000 of that amount as “in-kind” resources, like your time or materials you may already have. The remaining $25,000 must be in cash. You’ll need to prove that you have access to this money, which you can do by providing a bank statement or note from your bank showing your line of credit.
Meeting the match requirement can feel challenging, but with careful planning and creative use of “in-kind” resources, you can successfully meet this obligation.
Ready to Apply for VAPG?
First, identify the needs and opportunities of your operation, and what help can be most beneficial. This will help you decide whether or not you want to apply for Planning Activities, or Working Capital. Next, the “Value-Added” Project or Activity you propose on your Grant Application must fall into one of the five project methodologies listed at the beginning of this post. Additionally, it must show that the project will expand your customer base and increase your income and revenue.
Once you’ve decided on your project, it’s time to get working on writing your grant proposal. The USDA has created VAPG Fact Sheets, Toolkits for both Planning Activities and Working Capital, Budgeting Tools, and Instructions to go along with the Application. To help make this easier for you, Ag Funding Assistance has organized all of this information in one convenient place!
As always, subscribers to Ag Funding Assistance will receive convenient printable pdf forms, all program and contact information, and text message reminders 5 days prior to deadlines and closing dates to help you apply for VAPG through your local USDA / Rural Development office.
