USDA Rural Development Rural Business and Cooperative Service

1
USDA Rural DevelopmentRural Business and
Cooperative Service

• Larry Carnahan
• USDA Rural Development
• [phone]
• larry.carnahan_at_rurdev.usda.gov

Partners in helping the people of rural America
develop sustainable communities
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Value-Added Agricultural Product Market
Development Grants
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Value-Added Agricultural Product Market
Development Grants (FY 2001)

• STATE PROJECTS FUNDED
  AMOUNT
• Iowa 12
  4,870,378
• North Dakota 9
  3,222,258
• Kansas 3
  1,010,997
• Illinois 3
  600,000
• Minnesota 3
  1,144,950
• Wisconsin 3
  846,090
• Michigan 2
  692,000
• South Dakota 2
  901,704
• Total 37
  13,288,377
• Nationally 62
  19,856,719

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Value-Added Agricultural Product Market
Development Grants (FY 2002)
19
21
22
10
32
67
33
15
19
16
33
71
Nationally 714 Applications for 121 Million
dollars
5
Value-Added Agricultural Product Market
Development Grants (FY 2002)
13
1
5
6
9
4
5
3
20
9
20
2
14
4
1

5
29
13
2
7
0
0
3
1
8
4
8
12
12
2
1
1
0
4
1
0
4
4
0
0
5
2
9
231 Applications Selected for 37.2 Million
dollars
6

• The primary objective
• Is to help eligible producers of agricultural
  commodities, agricultural producer groups, farmer
  and rancher cooperatives, and majority-owned
  producer-based business ventures develop business
  plans for viable marketing opportunities and
  develop strategies to create marketing
  opportunities in emerging markets.

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The Farm Security and Rural Investment Act of
2002

• Farm Bill Highlights
• 40 million per year for 6 years
• Maximum Grant Amount 500,000 (priority points
  will be given for applications under the 500,000
  max)
• Applicants must provide matching non-Federal
  funds at least equal to the grant.
• Expanded eligibility

The Farm Security and Rural Investment Act of 2002
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Value-Added Producer GrantsFY 2003

• New name - VAPG
• Proposed regulation was published 6/13/03
• - public can submit comments until 8/12/03
• Anticipate Final rule and NOFA this fall
• Anticipate minor changes compared to 2002
• 28-38 million to be available

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Is Your Project Eligible?
Three Questions to Ask?

• 1) Are the funds being used for an eligible
  purpose?
• 2) Is the applicant an eligible entity?
• 3) Does your project meet one of the four
  categories of value-added activities?

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Is Your Project Eligible?

• 1) Are the grant and matching funds to be used
  for an eligible purpose?
• - Planning Activity
• - Working Capital
• - One or the other, not both

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Planning Activity

• Feasibility Studies
• Business and Marketing Plans
• Legal Evaluations

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Working capital

• - Legal and accounting costs
• - Salaries
• - Utilities
• - Inventories
• - Supplies
• - Office equipment
• - Other operating costs

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Is Your Project Eligible?

• If applying for working capital
• Must have an acceptable feasibility study
• - completed by qualified, independent
  third party
• - project size and location specific
• Also need an acceptable business plan
• Rural Development must approve prior to funding
  of the grant

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Ineligible Purposes

• - Costs associated with buildings or equipment
• - Engineering design for a specific facility
• - Costs incurred prior to closing of the grant
• - Pay for preparation of the grant application
• - Expenses related to ag production

15
Is Your Project Eligible?

• 2) Is the applicant an eligible entity?
• Independent Producers
• - individuals, business entities, steering
  committee
• Farmer or Rancher Cooperatives
• Ag Producer Groups (Commodity Organizations)
• Majority Owned Producer Based Businesses
• (50 or more)
• The last three groups must be entering
• emerging markets

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What is an Emerging Market?

• New or developing market for the applicant
• - Old product into a new market
• - New product into an old or new market

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Is Your Project Eligible?

• 3) Does your project meet one of the four
• categories of value-added activities for an
  ag
• product or commodity?
• - Change in the physical state
• - Production in a manner that enhances its
  value, as
• demonstrated by a business plan
• - Physically segregating in a manner that
  enhances its value
• - Used to produce renewable energy on a farm or
  ranch

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Is Your Project Eligible?

• These Activities Must
• Expand customer base for the product or
  commodity, and
• Result in a greater portion of the revenues
  derived from the value-added activity that is
  available to the producer.

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Kansas Projects Awarded
Grants FY 2002

• Jewel County Sunflower Processing (41,000)
• To assist with a feasibility study,
  business plan , and legal advise regarding a
  proposed sunflower processing plant.
• Padonia Grain Farmers, Inc. (50,750)
• To conduct a feasibility study and develop
  a business plan for segregating and marketing
  high protein corn.
• American White Wheat Producers Assoc.(218,710)
• For a feasibility study and business plan
  development regarding the processing of heavy
  bran for use in breakfast cereals and specialty
  breads.

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Kansas Projects Awarded
Grants FY 2002

• Western Plains Energy, LLC (291,615)
• For working capital to assist in the start
  up of a 30 mgy ethanol plant
• East Kansas Agri-Energy LLC (450,000)
• For working capital to assist in the
  start-up of a 20 mgy ethanol plant.
• Cooperative Ag Services (500,000)
• Working capital for the startup operation of
  a soy bean crushing facility.

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Kansas Projects Awarded Grants FY 2002

• 21st Century Grain Processing (500,000)
• Working capital for milling of hard white
  wheat and distribution of flour and food grade
  corn.
• U.S. Premium Beef, Ltd. (500,000)
• For a feasibility study, business plan,
  business and legal evaluations for acquisition of
  a majority ownership interest in a beef packing
  company

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FOR MORE INFORMATION
Larry Carnahan 620-784-5431 Email
2002farmbillRD_at_ks.usda.gov Rural Development
State Office in Topeka
785-271-2730 Website
www.rurdev.usda.gov/ks RBS/
Coop Services VADG website
www.rurdev.usda.gov/rbs/coops/vadg.htm

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RBS/ Coop Services VADG Website

• www.rurdev.usda.gov/rbs/coops/vadg.htm
• Proposed Regulation
• 2002 VADG Selections
• VADG 2002 NOFA
• State Office Contacts
• Score Sheet
• Application
• Tips on Completing Forms
• 2001 VADG Recipients

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Questions????
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Application Content and Scoring Criteria

• It is not rocket science
• Follow the NOFA and supply all the info requested
• Be specific and detailed, if vague, you will
  lose points
• Should be typed, handwritten may not be legible
  
• Make it easy for the reviewer to follow and
  understand
• - if cant find the info or doesnt
  understand, you will lose points
• If put together hastily, it will show

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Application Process

• An original and two copies of the proposal, with
  all required forms and documentation, must be
  submitted in one package to the appropriate USDA
  State Office.
• Electronic submission is encouraged.!

Original
Copy
Copy
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Application Forms and Proposal Format

• www.rurdev.usda.gov/rbs/coops/vadg.htm
• Forms may be downloaded by clicking on the form
  number
• Application For Federal Assistance SF-424
• Budget Information - Non-Construction Programs
  SF-424A
• Assurances - Non-Construction Programs SF-424B
• Proposal Format

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Proposal Format

• Table of Contents
• Proposal Summary
• Eligibility Statements
• Proposal Narrative
• Verification of Matching Funds

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Table of Contents

• located following the required SF-424 forms
• include page numbers for each component
• pagination to begin following the Table of
  Contents

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Proposal Summary

• Not to exceed one page, must include the
  following
• title of the project
• description of the project including goals and
  tasks
• names of the individuals responsible for
  completing
• the tasks
• expected timeframe for completing all tasks
  (should
• normally not exceed one year)
• state whether the grant is for planning or
  working
• capital

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Eligibility Statements

• A detailed discussion, not to exceed two pages
• Describe how you meets the definition of an
  eligible applicant
• If a producer group, identify the group of
  producers on whose behalf the work will be done
• Describe all other organizations involved in the
  project
• State the percentage that will be owned by
  producers
• Discuss the value-added product to be produced
  including the category of value-added

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Proposal Narrative

• Not to exceed 35 pages (Times New Roman, 12 pt.)
  and must include the following
• Project Title
• Must be brief, not to exceed 75 characters
• Describe the major thrust of the project
• Goals of the Project
• A clear statement of the ultimate goal of the
  project
• Describe the value-added venture to be
  developed

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Proposal Narrative (continued)

• Information sheet
• - A one page sheet which lists each of the
  evaluation
• criteria followed by the page numbers of
  all relevant
• material in the proposal which supports
  that criteria
• Evaluation Criteria
• - Each of the criteria must be addressed in
  narrative form
• with any specific supporting documentation
  included
• - Financial statements used to support will
  not count as
• part of the 35 page limit.

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Verification of Matching Funds

• If in cash, furnish a copy of a bank statement or
  a copy of the confirmed commitment from the
  funding source
• If in-kind match is included, provide
  verification of all commitments and how they are
  valued
• Applicants must certify that matching funds will
  be available and spent at the same rate as grant
  funds
• Other Federal grant funds cannot be used as
  matching funds

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Areas to Watch

• Clearly state how you meet the definition of
• - an eligible applicant
• - an eligible value-added activity
• - eligible use of grant and matching
  funds

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Areas to Watch

• Clearly document the source and amounts of
  matching funds
• - must be equal or greater than grant funds
• - should not be dependent on future
  earnings
• - if in kind, how is it valued

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Scoring Criteria Grants for Planning
Purposes

• 1. Nature of the Proposed Venture
  (Maximum 5 Points)
• 2. Qualification of Those Doing the Studies
  (Maximum 5 Points)
• 3. Project Leadership
  (Maximum 5 Points)
• 4. Commitment
  (Maximum 5 Points)
• 5. Work Plan/Budget (Maximum 5 Points)
• 6. Amount Requested
• 450,000 - 350,001
  .5 Point
• 350,000 - 250,001
  1 Points
• 250,000- 150,001
  1.5 Points
• 2 Points
• 7. Project Cost Per Producer (Maximum 5
  Points)
• 8. Presidential Initiative of Bio-energy
  Production
• (5 percent of total score)

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Scoring - Planning
Purpose1. Nature of the Proposed Venture
(maximum of 5 Points)

• Describe in detail the proposed venture
• explain what the venture is to accomplish
• describe the technology involved
• examples of the technology used in similar
  ventures
• Describe how the customer base for the product
  will be increased
• Explain how the project will produce more profits
  for the producer-owners
• More points will be awarded to ventures with
  proven technology
• and that have a good chance of being viable and
  sustainable. Also
• for the greatest expansion of markets and
  increased profits.

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Scoring - Planning Purposes2. Qualifications
of Those Doing the Studies (Maximum of 5 points)

• Describe their credentials education and
  experience in doing this type of study
• the success rate of other ventures based on their
  studies
• Include resumes
• Points will be awarded based on qualifications,
• demonstrated skills, and a successful track record

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Scoring - Planning Purposes
3. Project Leadership (Maximum of 5 points)

• Describe the individuals who are the members of
  the steering committee or the individual who is
  leading this effort
• provide information on education, business
  experience, financial experience, knowledge of
  the venture to be undertaken, and other relevant
  information
• Include resumes
• Points will be based on demonstrated relevant
  leadership
• skills. Backgrounds in business, finance, and
  the
• ventures technology will score higher.

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Scoring - Planning
Purposes 4. Commitment (Maximum of 5 points)

• Describe the level of producer commitment
  including
• the number of producers currently involved
• the number of producers who could become
  involved
• cash contributions from producers
• level of production from the producers
• Describe the potential commitment of end-users of
  the
• value-added product to be produced including
• possible markets identified
• potential buyers contacted

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Scoring - Planning Purposes 4. Commitment
(continued)

• Describe other commitment including technical
• assistance, financial support, and reference
  letters
• local and state development organizations
• commodity associations
• local and state government
• Institutions of higher education
• Others
• Higher producer, end-user, and local support
• will result in more points.

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Scoring - Planning Purposes 5. Work Plan/Budget
(Maximum of 5 Points)

• Discuss the tasks to be completed, when it will
  be done, who
• will do it, how long it will take, how much it
  will cost
• Each task must be clearly defined and described
  in detail
• The work plan must present the order in which the
  tasks will be undertaken and the estimated time
  for completing each task
• The budget must present a detailed breakdown of
  estimated costs and allocate these costs to each
  of the tasks to be undertaken.
• The grant and matching funds must be identified
  and allocated to
• the various tasks
• Logical, realistic, and economically efficient
  plans and budgets will
• result in higher scores.

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Scoring - Planning Purposes
6. Amount of Grant Requested (Maximum
of 2 points)

• 1/2 point for requests between 450,000 and
  350,001
• 1 point for requests between 350,000 and
  250,001
• 1 1/2 points for requests between 250,000 and
  150,001
• 2 points for requests of 150,000 or less

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Scoring - Planning Purposes 7. Project cost per
producer that is an owner (Maximum of 5
points)

• Divide the grant request by the total number of
  independent
• producers that are owners of the venture
• Up to 2000 5 points
• 2001- 8000 4 points
• 8001- 32,000 3 points
• 32,001- 125,000 2 points
• Over 125,000 1 point
• Points will be based on the largest number of
  producers
• that are owners benefited for the least cost

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Scoring - Planning Purposes
8. Bio-energy Production

• For applications that focus on the Presidential
  initiative of
• bio-energy production, five percent of the total
  score of
• the first seven criteria will be added to the
  final score
• For example, if an application scores a total of
  30 points on criteria one through seven, 1.5
  additional points
• (30 x 0.05) will be added, making the final
  score 31.5

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Scoring Criteria Grants for Working Capital

• 1. Business Viability (Maximum
  5 Points)
• 2. Customer Base/Increased Returns
  (Maximum 5 Points)
• 3. Commitment (Maximum 5
  Points)
• 4. Management Team/Work Force
  (Maximum 5 Points)
• 5. Work Plan/Budget (Maximum 5
  Points)
• 6. Amount Requested
• 450,000 - 350,001
  .5 Point
• 350,000 - 250,001 1 Points
• 250,000- 150,001 1.5 Points
• 7. Project Cost Per Producer (Maximum 5
  Points)
• 8. Presidential Initiative of Bio-energy
  Production
• (5 percent of total score)

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Scoring - Working Capital1. Business Viability
(Maximum of 5 points)

• - Describe in detail the technical and economic
  feasibility
• of the venture (reference the feasibility
  study and business plan)
• - Describe the organizational structure and
  operational
• aspects of the venture
• - Discuss how the venture will operate
  efficiently and be
• sustainable
• More points will be awarded to those proposals
• demonstrating the venture will be efficient and
  sustainable

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Scoring - Working Capital 2.
Customer Base/Increased Returns
(Maximum of 5 points)

• Describe how the customer base for the product
  being
• produced will expand
• Provide documented estimates of this expansion
• Describe how more profits will be returned to the
• producer/owners

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Scoring - Working Capital 2. Customer
Base/Increased Returns (continued)

• Provide 3 years of pro forma financial
  statements,
• including an explanation of assumptions
  used
• - must include cash flow statements,
  income statements, and
• balance sheets
• - Income statements and cash flow statements
  must be monthly
• for the first year, then annual for the
  next two years
• - the balance sheet should be annual for all
  three years
• More points will be awarded to those proposals
  that demonstrate the
• greatest expansion of the customer base and
  increased returns to
• producers

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Scoring - Working Capital 3. Commitment
(Maximum of 5 points)

• Describe the producer commitment including
• the number of producers who will participate
• their total level of production
• financial resources invested in the venture and
  their use
• any signed delivery agreements or letters of
  intent to deliver product to the venture
• Describe who will purchase the output of the
  venture
• the amount of output to be purchased
• markets that have been identified
• any completed marketing studies
• any letters of intent or signed marketing
  agreements from the potential end-users

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Scoring - Working Capital 3. Commitment
(continued)

• Describe other commitment including technical
• Assistance, financial support, reference letters.
• local and state development organizations
• commodity associations
• local and state government
• others
• Points will be awarded based on the greatest
  level of
• documented commitment

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Scoring - Working Capital 4. Management
Team/Work Force (Maximum of 5 points)

• Describe in detail the qualifications of the
  individuals who will manage and operate the
  venture
• Discuss the education and experience of the
  management team, especially that experience in
  managing similar ventures
• Include resumes
• Describe the availability and quality of the
  labor force needed to operate the venture
• Points will be awarded based on the greatest
  demonstrated
• level of relevant skills and experience

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Scoring - Working Capital5. Work Plan/Budget
(Maximum of 5 points)

• Discuss the tasks to be completed, when it will
  be done, who
• will do it, how long it will take, how much it
  will cost
• Each task must be clearly defined and described
  in detail
• The work plan must present the order in which the
  tasks will be undertaken and the estimated time
  for completing each task
• The budget must present a detailed breakdown of
  estimated costs and allocate these costs to each
  of the tasks to be undertaken.
• The grant and matching funds must be identified
  and allocated to
• the various tasks
• Logical, realistic, and economically efficient
  plans and budgets will
• result in higher scores.

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Scoring - Working Capital
6. Amount of Grant Requested (Maximum
of 2 points)

• 1/2 point for requests between 450,000 and
  350,001
• 1 point for requests between 350,000 and
  250,001
• 1/2 points for requests between 250,000 and
  150,001
• 2 points for requests of 150,000 or less

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Scoring - Working Capital7. Project cost per
producer that is an owner (Maximum of 5 points)

• Divide the grant request by the total number of
• independent producers that are owners of the
  venture
• Up to 2000 5 points
• 2001-8000 4 points
• 8001-32,000 3 points
• 32,001-125,000 2 points
• over 125,000 1 point
• Points will be based on the largest number of
• producers/owners benefited for the least cost

57
Scoring Working Capital 8. Bio-energy
Production

• For applications that focus on the Presidential
  initiative of
• bio-energy production, five percent of the total
  score of
• the first seven criteria will be added to the
  final score
• For example, if an application scores a total of
  30 points on criteria one through seven, 1.5
  additional points
• (30 x 0.05) will be added, making the final
  score 31.5

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Scoring Areas to Watch

• For Working Capital
• Business Viability and
• Customers Base/Increased Returns
• Adequate feasibility study and business plan
• Financials should have adequate documentation
• to support the projections and assumptions

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Scoring Areas to Watch

• For a Planning Activity
• Qualification of those doing studies
• If you can document who will be doing your work
  and they are well qualified with a history of
  successes, you will score higher than if no one
  specific is to complete the study

60
Scoring Areas to Watch

• Project Leadership or Management Team
• Committees, boards, and multiple individuals
• with varied education, experiences and skills
  score higher than a single individual

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Scoring Areas to Watch

• Thoroughly document commitment and support
• - producer
• - end user
• - third party
• Get those third party endorsement letters

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Scoring Areas to Watch

• Do a detailed work plan and budget
• - allocate costs to each task
• - include a time schedule for the task
• - account for the use of grant and matching
  funds
• - make sure adequate narrative to explain the
• numbers

63
Scoring Areas to Watch

• Look at the scoring criteria for
• Amount of grant requested
• Cost per producer/owner
• You may want to reduce your requested
• amount slightly to add more score points

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For an Application Template

• Food Processing Center at the University of
  Nebraska-Lincoln
• Website fpc.unl.edu
• Scroll part way down the page and under Value
  Added Development Grant, click on templates

65
Questions????