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_ks.usda.gov
• September 2003

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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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
4

• 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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What does this mean

• Get agricultural producers into adding value to
  the products they produce
• Help producers expand the customer base for their
  products or commodities, and
• To ensure that a greater portion of the revenues
  derived from the value-added activity is
  available to the producer

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Value-Added Agricultural Product Market
Development Grant Applications (FY 2002)
19
21
22
10
32
67
33
15
19
16
33
71
Nationally 714 Applications for 121 Million
dollars
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Value-Added Agricultural Product Market
Development Grant Selections (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
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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.

9
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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Value-Added Producer Grants
2003

• VADG / VAPG
• NOFA was published September 4, 2003
• Deadline for applications is October 20, 2003
• Minor changes compared to last year
• Approximately 27.7 million to be available
• Business applicants must obtain a DUNS number

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RBS/Coop Services VADG Website

• www.rurdev.usda.gov/rbs/coops/vadg.htm
• Up to date program information
• September 4, 2003 NOFA
• The process for obtaining a DUNS number
• Application forms and content requirements
• Tips on Completing Forms
• Score Sheets
• 2002 VADG Selections

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Is Your Project Eligible?
Three Levels of Eligibility

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

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Is Your Project Eligible?

• 1) Is the applicant an eligible entity?
• Independent Producers
• Farmer or Rancher Cooperatives
• Ag Producer Groups (Commodity Organizations)
• Majority Owned Producer Based Businesses
• (more than 50)

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Applicant Eligibility

• Independent Producer
• An individual producer of agricultural
  commodities or products
• An association, such as a corporation or LLC
  solely owned by producers
• A steering committee of producers in the process
  of organizing an association
• can not produce under contract or joint ownership
  with any organization other than their own.

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Applicant Eligibility

• Farmer or Rancher Cooperative
• A business incorporated under state cooperative
  or
• corporation statutes that is farmer or
  rancher
• owned and controlled, and benefits are
  returned to the farmer/rancher owner on the basis
  of their patronage of the cooperative
• Must propose ventures that are entering into
• emerging markets

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Applicant Eligibility

• Agricultural Producer Groups
• Any organization that represents independent
  producers, such as a trade association or a
  state/national commodity group
• Must provide the assistance to a specifically
  identified group of independent producers
• Must propose ventures that are entering emerging
  markets

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Applicant Eligibility

• Majority-Controlled Producer Based Business
• Ventures
• A corporation, LLC, or other type of business
  structures where producers have more than 50
  percent ownership and control
• Must propose ventures that are entering emerging
  markets
• No more than 10 on the grant funds can be
  awarded to these ventures

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What is an Emerging Market?

• A new or developing market for the applicant
• A market the applicant has not traditionally
  supplied
• Venture must focus on the emerging market
• New product into an old or new market
• New market for an old or new product

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Is Your Project Eligible?

• 2) 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
• Segregating in a manner that enhances its value
• Used to produce renewable energy on a farm or
  ranch

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Product Eligibility

• The changing of the physical state or form of
  the product
• Examples
• processing wheat into flour
• corn into ethanol
• slaughtering livestock or poultry

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Product Eligibility

• A product produced in a manner that enhances
  its value, as demonstrated through a business
  plan
• An example is organically produced products

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Product Eligibility

• The physical segregation of a commodity
• or product in a manner that results in the
• enhancement of its value
• Examples
• an identity preservation system for a variety or
  quality of grain desired by an identified
  end-user
• the traceability of hormone-free livestock from
  the farm to the retailer

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Product Eligibility

• Using any agricultural commodity or product to
  produce renewable energy on a farm or ranch.
• An example is collecting and converting methane
• from animal waste to generate energy
• Does include wind and solar

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Product Eligibility

• A Value-Added Product 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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Is Your Project Eligible?

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

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Eligible Purposes

• Planning Activities to determine viability
• Feasibility Studies
• Business and Marketing Plans
• Legal Evaluations

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Eligible Purposes

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

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

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Feasibility Studies

• Completed by a qualified, independent third party
• Should include five feasibility components
• 1. Economic
• 2. Market
• 3. Technical
• 4. Financial
• 5. Management
• Selection of a consultant

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Ineligible Purposes

• Costs associated with buildings or equipment
• Engineering design for a specific facility
• Costs incurred prior to receiving (closing) the
  grant
• Pay for preparation of the grant application
• Expenses related to ag production
• Expenses not directly related to the venture
• Fund political and lobbying activities
• Activities prohibited by 7 CFR parts 3015 and
  3017

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Application Process

• Complete applications, with all required forms
  and documentation, must be received no later than
  October 20, 2003 at 400 p.m.
• Late applications will not be accepted
• Electronic submission is encouraged,
  but must mail or fax the three signed
  SF-424 forms

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Application Process

• Submit completed applications to
• USDA Rural Development
• Larry Carnahan
• P.O. Box 437
• Altamont, KS 67330
• Fax [phone]
• Email larry.carnahan_at_ks.usda.gov

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Application Process

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

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Application Process

• A Complete Application consists of
• SF-424 Application for Federal Assistance
• SF-424A Budget Information - Non-Construction
  Programs
• SF 424 B Assurances - Non-Construction Programs
• Table of Contents
• Proposal Summary
• Eligibility Statement
• Proposal Narrative
• Project Title
• Information Sheet
• Goals of the Project
• Evaluation Criteria
• Verification of Matching Funds

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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 and content

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For a Proposal Format Template

• K-State VABDP has developed a template
• On the internet at www.agmanager.info
• Soon to be on the Kansas Rural Development
• website at www.rurdev.usda.gov/ks
• K-State VABDP will provide assistance in
  reviewing your applications
• Send draft application as an email attachment to
  coltrain_at_agecon.ksu.edu
• Send at least one week before the 10/20/03
  deadline
• Contact David Coltrain 785-532-1523

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Application ProcessAreas 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
• Specify whether the application is for planning
  or working capital

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Application ProcessAreas to Watch

• Verification of Matching Funds
• Clearly document the source and amounts of
  matching funds
• If in cash, furnish a copy of a bank statement or
  a copy of the
• commitment from the funding source
• If in-kind match, provide verification of all
  commitments and how they are valued
• Matching funds must be equal to or greater than
  grant funds
• Must 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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Application Process

• Each proposal will be evaluated and scored by
  three reviewers
• One review will take place at the State level
• Upon determining eligibility, the State Office
  will submit the proposals to a contractor for
  two additional reviews

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Application Process

• After reviews are completed, proposals are ranked
  highest to lowest based on their scores
• Grants are awarded from the highest score down
  until the money is gone
• Successful and unsuccessful applicants are
  notified in writing

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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, is it proven
• How will the customer base will be increased
• How more profits will be available for
  producer-owners
• More points will be awarded to ventures with
  proven technology,
• that have a good chance of being viable and
  sustainable, and 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 on 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, etc.
• 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 involved or to be
  involved
• cash contributions and level of production
• Describe the potential commitment of end-users
  including
• possible markets identified and buyers contacted
• Describe other commitment including T/A,
  financial, and references
• Local/state development organizations and
  governmental entities
• commodity associations
• Institutions of higher education
• 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 when, who, how long, and cost
• Each task must be clearly defined and described
  in detail
• Present the order in which the tasks will be
  undertaken and the estimated time to complete
• Present a breakdown of estimated costs and
  allocate to each of the tasks
• The grant and matching funds must be allocated to
  each task
• Grant match funds should be spent at the same
  rate on each task
• 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
• Points will be based on the largest number of
• producers / owners benefited for the least cost

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Scoring - Planning Purposes
8. Bio-mass 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
  will expand
• Provide documented estimates of this expansion
• Describe how more profits will be returned to the
  producer/owners
• Provide 3 years of pro forma financial
  statements, including an explanation of
  assumptions used
• - include cash flow and income
  statements, balance sheets
• More points will be awarded to those proposals
  that demonstrate the
• greatest expansion of the customer base and
  increased returns to the
• producers

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

• Describe the producer commitment including
• the number of producers and their level of
  production
• financial resources invested and their use
• signed delivery agreements or letters of intent
• Describe who will purchase the output of the
  venture
• the amount to be purchased
• completed marketing studies or markets that have
  been identified
• marketing agreements or letters of intent from
  the potential end-users
• Describe other commitment including T/A,
  financial, or references
• Local/state development organizations and
  governmental entities
• commodity associations
• 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 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 when, who, how long, and cost
• Each task must be clearly defined and described
  in detail
• Present the order in which the tasks will be
  undertaken and the estimated time to complete
• Present a breakdown of estimated costs and
  allocate to each of the tasks
• The grant and matching funds must be allocated to
  each task
• Grant match funds should be spent at the same
  rate on each task
• 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
• Points will be based on the largest number of
• producers/owners benefited for the least cost

59
Scoring Working Capital 8. Bio-mass 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
  is specifically identified to complete the study

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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

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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 grant
• amount slightly to add more score points
• Follow the NOFA and address all parts of each
• scoring criteria very thoroughly

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FOR MORE INFORMATION
Larry Carnahan 620-784-5431 Email
larry.carnahan_at_ks.usda.gov Rural Development
State Office 785-271-2730 Website
www.rurdev.usda.gov/ks Email 2002farmbillRD_at_ks.u
sda.gov RBS/Coop Services VADG website
www.rurdev.usda.gov/rbs/coops/vadg.htm Applicatio
n template at www.agmanager.info
David Coltrain 785-532-1523
Email coltrain_at_agecon.ksu.edu