Jun 13, 2012Grants help farms expand value-added products
USDA recently awarded $40.2 million in value-added producer grants to 298 recipients in 44 states and Puerto Rico.
According to USDA, the grant program is a tool for independent fruit and vegetable producers, among others in the farming industry, to enhance their ability to meet consumer demand and move their products into the marketplace.
“These projects will provide financial returns and help create jobs for agricultural producers, businesses and families across the country,” said Kathleen Merrigan, USDA’s deputy secretary. “This funding will promote small business expansion and entrepreneurship opportunities by providing local businesses with access to capital, technical assistance and new markets for products and services.”
Program guidelines hold that grants can be made in amounts up to $300,000 for working capital and $100,000 for planning. Applicants must be able to match the USDA grant dollar for dollar.
“This isn’t just a handout,” said Mike Daniels, a loan specialist with the business and cooperative programs section of USDA Rural Development in Wisconsin. “They have skin in the game. It’s a dollar for dollar match.
“It takes their idea and they’re putting in their labor, their time, their money and the government has given them an opportunity to take the hog he would have sold to market and convert it into smoked bacon and hams and stuff and sell them at a premium price.”
While the funds can’t be used to purchase equipment or other physical assets, they can pay for feasibility studies, business plans, marketing and farm-based renewable energy projects, according to USDA.
“We had one gentleman who talked about how he’s gotten to capacity because of a grant that was awarded last year,” Daniels said. “He’s been able to put on a couple or three new employees. His business has grown.
“He is very pleased with how this grant has helped him out, getting his feet on the ground and getting things going forward.”
Dave Cornaby, a raspberry grower in Salem, Utah, said he and sister Janet Stocks received a $239,000 grant that is going to help them launch a new value-added product they’re calling Fruitivia.
Already making, selling and distributing various processed berry products and syrups through grocery stores, as well as fresh berries, they were seeing a decrease in jam consumption and decided to come up with a product that would appeal to people in a younger age demographic and those with a health or weight loss focus, he said. Composed of about 75 percent fruit and sweetened with Stevia so it has zero added calories, Fruitivia is a type of fruit gel that can be consumed directly from the pouch, used similar to a spread or sauce or frozen into a slush.
Cornaby said that the grant would help take Fruitivia to the next level.
“The grant is basically to help with working capital,” he said.
Marketing, advertising, procuring ingredients, website and overhead expenses will all be supported with assistance from the grant.
Cornaby said they’ve gone to producing value-added products to offer a revenue stream that doesn’t come from traditional farming. While he grew up as a farm boy, he had left and was working as an electrical engineer when his dad called the family together about four years ago to say he was getting too old to run the farm and was going to sell unless the children wanted to step up.
“I was all through farming,” he said. “I had a nice job running a division for a major company. But I guess I just had enough dirt under my fingernails that I couldn’t see dad selling the family farm. So I came back.”
Instead of continuing to grow peaches, apples, grain and alfalfa as his father did, Cornaby decided to focus on raspberries. The value-added products followed.
“In good years you break even, and in bad years you lose money,” he said. “We wanted to get a crop that has the potential of actually making us some money and expanding.
“When I went into this, I said, ‘I can make something out of this farm. We will develop products that are truly something that can contribute to the world.’”
And he believes Fruitivia will be one of them.
“I think we have something here,” he said. “Kids really like this product; it’s very healthy for them, very convenient for mom.
“It can help change that whole attitude toward eating fruit. I can’t think of a better thing to do than influence the health of a new generation.”
At Six Rivers Cooperative in northwestern Wisconsin, vice president and manager Maurice Smith said a $149,700 grant the group received in 2010 helped increase market share by providing operating capital. Established in 2008, Six Rivers is owned by about 20 farmers across the region, who sell their own products as well as some purchased from other farmers.
“We sell to somewhere between 60 and 65 restaurants and to three or four (food) co-ps,” Smith said. “Our members are also selling other places, too. Some are Amish folks and they only sell through us.”
The USDA grant helped the cooperative pay its member-farmers on a more timely basis, purchase inventory and cover labor for packaging and sales.
“The bad thing about the grant is you can’t use the grant money for equipment, which is a real handicap because you can’t go out and increase your market and sell more product if you don’t have the equipment to do it with,” Smith said. “It’s kind of a chicken and egg thing. You already have to have your facilities in place before you can do the marketing and delivering.”
For example, Smith said it would have been great to be able to purchase a truck with grant money. He handles all of the deliveries, purchasing product from members at a price that reflects what the product is worth, along with his expenses for maintenance, fuel, utilities for coolers, labor for packing the boxes, “all of the stuff that goes with having a delivery service – insurance and the whole ball of wax,” he said.
Smith and his wife, Gail, run Dragsmith Farms in Barron, Wis., where they grow organic crops. It’s there that Smith runs the co-op out of a 3,000-square-foot building.
“We were already doing all this before we started the co-op,” he said. “We’ve had to increase our capacity.”