What is a VAPG?

A VAPG is intended to help agricultural producers plan and implement value-added ventures that may help generate higher revenue. Farmers, ranchers, foresters, and fishermen may receive USDA Rural Development matching grants for either planning or working capital purposes to implement value-added ventures – i.e. for marketing or processing projects that will add value to the commodities they produce or for on-farm renewable energy generation projects. The ultimate goal of the program is to increase the producer’s share of revenue from the commodities they produce.

VAPGs are divided into two categories; you may apply for a working capital grant or a planning grant. Each grant contains different funding and eligible activities. An applicant cannot hold a planning grant and a working capital grant at the same time.

For more information about applying for a VAPG, take a look at the Farmers’ Guide to Applying for VAPG Funding from the National Sustainable Agriculture Coalition.

Applications for the FY 2022 grant cycle are due May 2, 2022. This year, a total of $19.75 Million was available for funding and the match requirement was reduced from 100% of grant funds to 10% of grant funds for funding under COVID-19 relief funds. The other available funds have a statutory cost share match requirement of 100 percent of the grant amount.

How can the funds be used?

A planning grant can be used to fund:

A working capital grant can be used to fund:

  • purchase of inventory and supplies
  • salaries, utilities, and office rent
  • legal and accounting costs
  • conducting of marketing campaigns
  • branding and packaging materials

Who can apply?

  • Independent producers (either individuals or business entities) – i.e. farmers, ranchers, foresters, and fishermen – who will produce a majority of the commodities to which value will be added and 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, but if selected for funding, the group must form a legal, business entity structure before the award can be made.)
  • “Beginning Farmers or Ranchers” who are independent producers who have been farming for less than 10 years. They may have access to 10% of VAPG funds with Socially Disadvantaged Farmers or Ranchers.
  • “Socially Disadvantaged Farmers or Ranchers” who are independent producers where the primary person is either a minority or a woman. They may have access to 10% of VAPG funds with Beginning Farmers or Ranchers.
  • Agricultural Producer Groups that are represented and controlled by independent producers (10 percent set-aside for socially disadvantaged and for new producers from the 2008 Farm Bill).
  • Farmer or Rancher Cooperatives consisting exclusively of independent producers.
  • Majority-Controlled Producer-Based Business Ventures that are legal business entities that are majority-owned and controlled by independent producers. (Note that such applicants cumulatively may not receive more than 10% of VAPG funds.)
  • Mid-Tier Value Chains which are locally and regionally supplied networks that link farmers and ranchers with businesses and cooperatives that market value-added agricultural products. (10 percent set-aside for this area from the 2008 Farm Bill.)

What is considered a value-added activity?

A “value-added” activity must increase the value realized by a producer for their agricultural commodity by BOTH expanding the customer base AND generating a greater return to the producer by using any of the following five methods:

  1. Commodity processing – processing that changes the commodity’s physical state (e.g., wheat flour, fruit jam, diced tomatoes, biodiesel, ethanol, fish fillets, wool rugs).
  2. Value-enhancing production – producing a commodity in a manner that is different from “normal,” thereby creating a market identity that increases value (e.g., organic, free-range, natural-fed).
  3. Commodity segregation – physically separating the commodity from other similar commodities during both production and marketing (more than simple sorting by grade). Includes traceability and identity-preserved systems (e.g., GMO-free commodities and varietal purity).
  4. Renewable energy – on-farm production of renewable energy either through the conversion of agricultural commodities or their byproducts into energy (e.g., biomass, anaerobic digesters). Wind, solar, geothermal, and hydroprojects are not eligible.
  5. Locally-produced food – food that is produced and marketed either within 400 miles or within the same state (e.g., locally-grown food).

What’s the catch?
“Emerging market” requirement. Working capital projects must involve either a value-added product or a market outlet that the applicant has not traditionally supplied for more than two years. (Note that independent producer applicants are exempt from this requirement.)
Location: VAPG projects do not need to be located in a “rural” area.

Matching requirement
50% or more of project costs must come from other sources (no larger match is required). “In-kind” matching is allowed but strongly discouraged as it must be fully justified and documented, and it will be subjected to extensive verification. VAPG funds are disbursed only after the grantee has first contributed at least an equal amount for eligible purposes. Click here for more information on matching funds.

Grant limitations
The VAPG project cannot start before the grant award is closed and must be completed within three years. The grant usage window is indicated in the grant announcement and changes yearly.

VAPG funds may not be used for:

  • Agricultural production, harvesting, or commodity transportation.
  • Research & development (the specific value-added product must already be known and have a high probability of success).
  • Land, real estate facility planning, design, engineering, acquisition, repair, improvement, or construction.
  • Purchase or rent of machinery and equipment such as vehicles or boats. Office and computer equipment is excluded from this restriction.
  • Payments to any firm not at least 51% owned by US citizens or permanent residents.
  • Payments to owners or family members (salaries, dividends, etc.)
  • Grant application costs; lobbying.
  • Only one VAPG grant per applicant may be awarded in a fiscal year.
  • A given value-added project is restricted to not more than one Planning Grant plus one Working Capital Grant.

How are VAPGs scored?
VAPGs are scored by an independent reviewer and grants are awarded competitively based on a score. A minimum of 45 points is required for an application to be considered.

FY 2019’s VAPG Point Criteria
All Proposals
Nature of the Proposed Venture: overall merit of the project.
Qualifications of Project Personnel: who will complete the proposed tasks?
Commitments & Support: shown through letters of support and/or commitment.
Work Plan and Budget: project tasks and required funds.
 Priority Points are awarded if an applicant meets one of following:

  1. Beginning Farmer or Rancher
  2. Veteran Farmer or Rancher
  3. Socially Disadvantaged Farmer or Rancher
  4. Operator of a Small or Medium-Sized Farm or Ranch (<$1 million in sales per year) that is structured as a family farm
  5. Mid-Tier Value Chain proposals
  6. Farmer or Rancher Cooperative
USDA Administrator discretionary points (innovation, underserved areas, geographic distribution, etc.)

For more information, visit the USDA’s website.