\[Click and insert application title here\]

A 2007 Value-Added Producer Grant Planning Application

Submitted by:

\[Click and insert Applicant Name here\]

\[Click and insert Applicant Street Address\]

\[Click and insert City, State, Zipcode here\]

\[Click and insert date here\]

TABLE OF CONTENTS

SF 424 i

SF 424A ii

SF 424B iv

Title Page vi

Table of Contents vii

Executive Summary 1

Eligibility Discussion 2

Proposal Narrative page \#

> Goals of the Project page \#
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> Performance Evaluation Criteria page \#
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> Proposal Evaluation Criteria page \#
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> Nature of the Proposed Venture.................... page \#
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> Qualifications of Those Doing the Work page \#
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> Commitments and Support page \#
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> Project Leadership page \#
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> Work Plan/Budget page \#
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> Amount Requested page \#
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> Project Cost per Owner-Producer page \#
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> Business Management Capabilities page \#
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> Sustainability and Economic Impact page \#
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> Business Size page \#
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> Administrator Points (if applicable) page \#

Certification of Matching Funds page \#

Appendix A: Verification of Matching Funds page \#

Appendix B: Letters of
Support........................................................... page
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RD Instruction 4284.910c(3)

Executive Summary. A summary of the proposal should briefly describe the
project including goals, tasks to be completed and other relevant
information that provides a general overview of the

project. In this section the applicant must clearly state whether the
application is for a Planning Grant or a Working Capital Grant and the
amount requested.

Example #1

EXECUTIVE SUMMARY

DAIRY COMPOST PRODUCTION AND MARKETING OPERATION

Purpose: Planning Grant Amount: \$10,000

Goals: Dairy seeks to create an additional revenue stream through
processing and marketing a high quality compost product. This compo
sting operation would involve the use of new technology. A relationship
is being developed with a specialty manufacturer of a piece of equipment
used in the composting process. This equipment would convert raw dairy
waste into a high-quality compo sting product in a single operation.
This new technology would be superior to more conventional means of
composting animal waste.

Tasks to the completed:

1\. Economic & Market Feasibility \-- a detailed study of the industry
is necessary to determine the potential markets for the compost product.
This will involve an analysis of the pricing of the product based upon
nutrient quality, transportation costs, and the number of potential
markets. Also a study of the various wholesale and retail market outlets
for compost.

2\. Technical & Financial feasibility \-- a determination will need to
be made as to the ultimate cost of the needed equipment. This equipment
may need to be modified or redesigned to meet the needs of this
particular application. The study will include an estimation of the cost
of producing the product on a per unit basis. This information will be
used in the development of pro forma financial statements including the
analysis of a rate of return for the venture.

3\. Business Planning: if the results of the various aspects of
feasibility are favorable than the project would be transitioned into
business planning. In this operation a more detailed program will be
developed as it relates to marketing and sales, distribution strategy,
production and management, and financial analysis.

Other information: Dairy is a 900 cow dairy operation with a
conventional waste management system. The current system involves the
spreading of the waste on farm acres in the local community. There are a
number of agreements in place in which farmer - producers accept this
product as a source of fertilizer and soil nutrients.

Example #2

In 1984, twelve California Jersey cow dairy farmers founded Cheese
Company Inc. (CC) in order to make cheese from their high-protein milk.
It is now the largest and fastest growing cheese company in the USA. In
addition to their cheese business, the company has a whey processing
division, part of which, manufacturers edible lactose and protein
powders. Whey processing produces various co-product streams that were
traditionally considered waste. Research has identified the potential to
create a new animal feed from the whey by-product stream.

As part of its current expansion plans, CC has identified an opportunity
to expand its market

for animal feeds. To implement this, Cheese needs to develop a detailed
business plan to

understand the California animal feed market and what, if any, additives
would make the whey

derived animal feed competitive in the marketplace.

1\. Analyze the market opportunities and desirable additives for whey
derived animal feed in

California and the Western United States.

Responsible Person: \*

Consultancy Firm: Agriculture Lab

2\. Develop a business plan.

Responsible Person: \*

Team members: \*, \*, \* and \*,

The timeframe to complete the market analysis and business plan is
September 30, 2006.

Cheese Company is therefore applying for a planning grant for \$0.

Example #3

Mangosteen is a tropical fruit that is native to Malaysia and Indonesia
and is well suited to tropical and sub-tropical climates. It can take up
to 10 years for a tree to mature and produce its first crop. The fruit
is three to four inches in diameter and is purple in color when ripe.
The rind is thick and leathery and the fruit is white and has easily
separated segments. Onomea Orchards currently has 1 acre of fruiting
Mangosteen trees, as \'well as 42 acres of other tropical fruits. We
currently sell these fiuits in their raw state, and have developed a
fruit concentrate. The\' goal of this project is to develop markets for
this Mangosteen concentrate that can be sold directly to customers in
its concentrated form or that can be added to another product The
growing body of literature on health properties of antioxidants has
increased in the past couple of years. The Mangosteen concentrate is
very high in antioxidants. With the increased knowledge of the positive
effects, we can provide consumers with an easily consumed suggested
amount of antioxidants and other naturally occurring nutrients. Sales of
this product will increase the income of Onomea Orchards thereby
increasing the long term financial sustainability of their family owned
and operated farm. The marketing plan will include a strategy for
eventual expansion into a global market. The main objectives of the
project are to establish the feasibility of marketing our product,
develop the specific target markets and produce the following documents:

1\. Feasibility Study to evaluate two main possible market niches for
our product. The feasibility study will also incorporate information
from a nutritional content lab analysis and a processing method analysis
which includes analytical Workups and specific antioxidant information.
Two mainland laboratories have been located to do the more complex
analysis. A local Plant Physiologist from USDA has agreed to help with
some of the more general testing necessary. As part of the feasibility
study, market research will be conducted by a professional marketing
consultant who will establish likely niches and build relationships with
potential customers.

2\. Marketing Plan to outline the marketing strategy. This will include
hiring a company to design product logo and packaging as well as
incorporating information from the market research to outline our
marketing strategies. Once the markets with the most profit potential
have been identified through the feasibility study, a product
development company will be hired to design appropriate labels and
packaging for the value-added product for each niche. Our primary
emphasis will begin with the cosmetic area as we have been contacted by
a leading luxury goods company. (Attached letter)

3\. Business Plan to establish efficient operational processes
operations and evaluate profit potential. A professional consultant will
be hired to help develop and write the business pan and the Hawaii Small
Business Development Center will be contributing free guidance
throughout the process. In order to accomplish these objective, we are
asking for a planning grant of \$ to help us pay for the associated
costs.

Eligibility Discussion

RD Instruction 4284.910c(4)

Eligibility. The narrative must include a detailed discussion of how the
applicant meets the eligibility requirements.

\(a\) The proposed project must evidence a high likelihood of creating
Value-Added for an Agricultural Product. *The purpose of the VAPG
program is for producers to move into successful value-added businesses.
This is not a research or a research and development program. This IS
not a program to try untested ideas. Ventures should be such that there
is a high probability of success.*

\(b\) Independent producers, Agricultural producer groups, Farmer or
Rancher cooperatives and Majority-Controlled Producer-Based Business
Ventures, are eligible for grants under this subpart.

Applicant Eligibility

Example #1

Organization Meets NOFA Definition

Cheese Company (CC) is a privately owned corporation founded by 12 dairy

producers. Initially, the dairy producers owned all shares, but with the
growth of the company,

12% of the shares were divested to immediate family members. Currently,
20 dairy producers

make up 88 percent of the ownership of the company. CC produces a
variety of cheese and

whey products. CC cheese and whey products are sold throughout the world
for use in diverse

applications as frozen dinners, processed cheeses, fast food, baking
ingredients, infant formulas,

sports nutrition, confectioneries.

CC has the largest private milk supply on the West Coast, purchasing
milk from and providing

services to more than 260 dairy producers milking over 125,000 cows in
the Central Valley and

North Bay area of California. CC has been key in improving milk prices
for dairymen in

California by offering innovative pricing systems.

In addition to manufacturing, CC operates an educational visitor center
that strives to educate

consumers about such topics as environmental stewardship, nutrition, and
food science.

Eighty-eight percent of the venture is owned and controlled by
independent producers.

Product Eligibility

Product is Value Added

The animal feed is created by changing the physical state or form of the
original commodity of

milk (NOFA definition #1). CC produces cheese creating a co-product of
whey. This whey is

currently filtered and processed into whey protein powder and edible
grade lactose powder. The

processing of whey creates additional product streams once considered
waste. Research has

demonstrated value to use this material as a base for value added animal
feed.

Purpose Eligibility

Project Purpose is Eligible

The purpose of this project is to determine the opportunities and best
markets for the products

then prepare the business plan for production and sales of the animal
feed in late 2006.

Example #2

Applicant Eligibility

Dairy Inc. is organized as a Sub Chapter S Corporation under the laws of
the State of \*. Mike \* is president of the corporation and owns 100%
of the stock. Dairy Inc. is a stand-alone entity and has no other
owners, partners or others with any material interest in the firm.

This entity owns all of the elements of production including all
material inputs, products in progress, and all finished products and
by-products up to the final point of sale. This ownership includes all
feed products, livestock, machinery, real property, etc. All labor
involved in this venture are employees of Dairy Inc.

Product Eligibility

The subject raw commodity is animal waste from a 900 cow dairy herd.
According to a 2003 article by Washington State University Extension
entitled \"Dairy Waste Composting\" this process adds value.
\"Composting converts manure and bedding nutrients to a more stable
form, adds humic acid to the soil, increases beneficial soil organisms,
improves soil tilth and aeration, reduces raw manure odors, and reduces
reliance on synthetic fertilizers. Although compost is not usually
marketed as fertilizer, it can add nutrients to the soil. Compost users
include home gardeners, landscapers as well as farmers and local
governments.\"

This processing involves a change in the physical state as well as the
chemical state of the raw product.

Product value: The value of the product depends upon whether it will be
marketed on a wholesale I or retail basis. Wholesale values would be in
the neighborhood of \$20 per ton. The current method of disposal of raw
manure for Dairy mc. involves agreements with local farmers to disburse
the product on their crop acres. There is no return to Dairy mc. under
this current arrangement.

A Texas A&M University research article entitled: \"m Vessel Compo sting
of Dairy Cattle Solid Waste and Utilization as a Peat Moss Substitute\"
indicates that a 400 cow free stall dairy will collect approximately 7
cubic yards of solid waste each day. Therefore Dairy Inc. would produce
over 15 yd.3 of solid waste per day. Currently Dairy mc. has no positive
return in its waste Management system. Therefore a \$10-\$20 return per
cubic yard/ton would be an additional revenue center. At \$15/cubic yard
this translates to \$82,125 per year.

Example #3

(the Company) is a collaboration of independent producers and the
applicant for this Grant. The founding members are \* of \*, Maine; \*,
of \*, \* and \* of \*, Maine. As a limited liability company, the
governing documents require the Company to be 100% owned and operated by
members who are engaged in the business of alpaca faming. Each LLC
member qua1ifies under the terms of the grant as an independent producer
in that members own breeding stock producing raw fiber and is current1y
and has been pursing a variety of production and marketing strategies
designed to add value to their fiber. Although the Company may use raw
fiber from other alpaca farmers in connection with producing end
products to achieve certain economies of scale in the production
process, the added fiber purchased from other small farms represents
substantially less than 50% of the total fiber processed. All fiber
remains in the ownership of the three farms until such time as the end
products are sold. As part of this collaboration and in establishing its
business strategy, the three farms made a determination that it is of
primary importance to market under a joint branding strategy. All raw
goods of d1e three farms are combined and going forward will be
processed and sold under the common label of \*.

To date and with the exception of third party vendors, there are no
other organizations working with the Company. It is the intent of the
collaboration, however, that if successful this model will be expanded
to other eligible independent producers. Similarly, discussions with
existing U.S. resources working on a cooperative basis in the industry
are being pursued.

Product Eligibility:

This section addresses how the various components of the finished towel
product contribute to the Value-Added concept. This product will be
manufactured from Company's inventory, which includes Upland cotton
grown on the Native American Reservations, well suited for construction
of plush, soft and highly absorbent towels. The following brand names
are considered: \'\*\' or \'\*\", denoting the origins of the towels
with cotton grown by the Native American.

The value-adding factor can be calculated in the order of 1:5, meaning
that the conversion from raw material to finished product has multiplied
the original value by five-fold. For the purposes of this project, using
Native American cotton in the towels and constructing a value towel for
the hospitality industry are the principal contributing factors to
attaining a value-added product.

Change in physical state of the cotton product

Bath towels will be made from Company's certified cotton inventory. In
order to produce exceptionally soft and absorbent towels, in a
collaborative effort, the manufacturer specifies which type of cotton
must be dispatched from Company's warehouses and matches the
specifications with their inventory. Upland cotton will be used to
create the towels. Upland cotton has specific characteristics, such as
fiber length and strength; micronaire (describes maturity and fineness
of cotton fiber). The loops in the towels will be created also from
Upland cotton. Special arrangements will be made to create towels which
can endure the rigors of hotel use, such as daily laundry. In addition,
the towels need to be attractive to market to the gift shop channel. The
manufacturer is qualified to create such a product. The first step in
this process is the shipping of the cotton bales to \* Textiles in \*,
where the raw cotton will be spun, using a new spinning method, called
Hollow Ring Spinning. The yarn produced through this method will produce
towels which will mimic towels made from zero twist yarn (known to make
the softest, plushest and most absorbent towels in the market). In the
spinning process, Native American cotton will be blended with cotton
grown outside the reservations, in a ratio of 60/40, qualifying the
towels to be labeled: \"Made by American Indians\" Intertribal
Agriculture Council Standards). Company will certify that Native
American cotton was used in the yarn for the making of the towels. The
next step in the production is the weaving of the towels at \* Textiles
in \*, accordance to the specifications for hospitality towels and the
gift shop market. This step is followed by the cutting of the gray goods
(towel material woven in a loom before being cut into piece goods) to
create bath sheets, bath towels, hand towels, wash towels and bath mats.
The final step involves finishing the towels by expert sewing to create
the borders, vat or reactive dyeing (vat dyes obtained through oxidation
reactive dyeing bond-in the colorant obtaining bright colors, but
fugitive to chlorine based bleaches) and labeling with sewn-in labels
and/or embroidery. The planning study will determine through surveys
which processes to follow in the construction and finishing of the
towels. By following the steps outlined above, a significant change in
physical state from raw material to finished product will have been
achieved.

A Native American cotton product produced and segregated to enhance
value The newly planned cotton product will be manufactured in such a
way that it will stand out in the market for its value and uniqueness.
The towels will be constructed to be suited for two markets: the
hospitality channel and the gift shop channel. The planned promotional
components conveying the Native American IdP theme include the brand
name and story line about the Native American. The Planning Grant will
examine how customers react to the Native American logos, how this
approach will motivate buyers. The towels are intended to be
competitively priced. The cost to manufacture the towels is estimated at
\$/set (which includes bath towel, hand towel and wash towel). Cost of
embroidery, import duty, marketing and G&A cost will be added to the
Cost of Goods (COG). The sum total of these additional costs is
estimated to add \$/set.

The towel sets will be clearly identified for their \"identity
preservation\" as a segregating value enhancer. The promotional program
components conveying the IdP theme will include: sewn-in tags with
Native American unified logo, hang tags with Native American story line,
tribal logo embroidery, special website, brochures, direct mail, catalog
and other promotional marketing/advertising materials. As part of the
Planning Grant, the promotional materials will be tested in the market
for resonance and acceptance.

Because Company owns and produces its raw material and is a direct
marketer of the finished cotton product, it is projected that this
venture will significantly enhance the value of the cotton at the farm
gate. As a direct marketer, the towel program will eliminate a number of
broker involvements in the cotton chain, resulting in savings to the
program. This in turn will make the product more competitive creating
greater value to the product. While it is difficult to determine how
much actual dollar value will be added as a direct result of this
project, for forecasting purposes, a 15% enhancement of the raw cotton
value is projected. This is based on some assumptions, i.e., Native
American casinos and resorts will be interested in buying the towels and
that the cost to manufacture the towels not changes.

Environmental benefits add value to the product Corporate Social
Responsibility is quickly becoming a business norm. More and more
companies are starting to research, measure and reduce their impact on
the environment. Given the deep respect Native American cultures have
always had for the earth, this innovation in yarn spinning for towels
will suit them perfectly. By utilizing the hollow ring spinning, we are
able to achieve a weight savings of 25% over a towel with similar
absorption levels. This will help in lowering the overall environmental
impact of the hotels that purchase the towels. The energy required for
the constant laundering will be reduced due to shorter drying times.
This may not sound significant but-the energy that goes into laundering
a textile item is a high percentage of the overall environmental impact
of a product; it is higher than the energy required to manufacture the
item.

New and developing emerging markets and expansion of customer base.

Based on Company\'s considerable experience as a cotton marketer of raw
cotton bales to the textile industry, this venture is a next logical
step in expanding its customer base into the consumer towel market.
During the last two years, Company has launched the marketing of two new
towel lines in several sales channels. Entering the bath towel
hospitality market with a new Native American venture will be a new
market for Company, which will expand the existing customer base for the
current towel lines. Marketing these towels \"made by American Indians\"
to the casinos, resorts and gift shops on the reservations, is not only
new for Company, but has not been undertaken anywhere.

Through the planning grant this novel approach, with the Native American
IdP theme, is planned in four phases. These phases will involve a
gradually expanding market development which will look like this:

1\. pilot program marketing to the SW Resorts and Casinos (9
casino-resorts),

2\. Expansion of marketing to all US based Native American Resorts and
Casinos (350 casino-resorts),

3\. Expansion into the International Market in Europe and Far East
(where considerable interest in Native American products has been shown
in countries like Germany, Spain and France) and,

4\. Expansion to the US and international consumers.

Purpose Eligibility

Example #1

Dairy Inc. Compost Production and Marketing Operation: Planning Grant-

This is a planning grant project to determine the feasibility of
developing a composting operation

on an existing production dairy operation with two benefits including:

1\. Development of an outlet or market for processed animal waste

2\. Adding another revenue producing line to increase total enterprise
income.

Planning activities would include:

1\. Economic feasibility: evaluate the project based upon the
availability of labor,

transportation, utilities, and overall economic impact.

2\. Market feasibility: analyze various options for developing a sales
organization including sales management. Also this aspect would include
the development of a geographic and industry market area.

Research end-user markets: this would include an analysis of area
businesses and industries that may have a potential need for a
high-quality compost product. Initially this may include golf courses,
greenhouses, lawn and garden centers, as well as wholesale distributor
markets.

3\. Financial feasibility: Develop a firm estimate of sources and uses
of funds necessary for capital investment and working capital. Also
develop financial projections of revenue sources and expenses. These
would include pro forma cash flows, income statements, and balance
sheets.

4\. Technical feasibility: an analysis of the various technologies used
in composting mentioned above. This will include the development of a
workable technology based upon sight issues, environmental issues,
availability of skilled management and labor, as well as the
availability of equipment which is engineered to cost-effectively
develop a high-quality compost product.

These technologies include:

a\. fan separator technology

b\. passive and turned windrow processes

c\. in vessel/channel

d\. extended aerated static compile

e\. vermin- composting

5\. Management feasibility: a review of the organizational structure of
Dairy Inc.

as it relates to the skill level and time constraints of existing
personnel. This aspect would answer the question as to whether
additional management and labor would be required and the development of
a job description outlining the skills needed.

Example #2

\* County Biodiesel Development LLC is requesting a planning activities
grant for a proposed biodiesel production facility. The facility will
utilize at least 51 % of their soybeans from producer/owners for
production of biodiesel fuel and by-products.

The grant will be utilized to fund activities that are identified as
eligible planning activities as defined in \"The Value-Added Producer
grant 2006 Grant Application Guide\". All activities listed below will
utilize grant funds and are necessary for the processing and marketing
of the proposed value added product:

Conduct a feasibility analysis covering all aspects of the proposed
value-added venture to help determine the potential marketing success
for the venture with options assuming different output assumptions.

Developing a marketing plan for the proposed value-added product,
including identification of potential local and distant buyers,
distribution system, promotional campaigns and other aspects of market
development for financing, product development, raw materials and
product sales.

Obtain legal assistance related to the proposed value added venture
including, but not limited to development of the final required
corporate structure, preparing for issuing a prospectus, environmental
regulations, etc.

The agricultural product proposed for use by this project is the
biodiesel production process using soybeans of which at least 51 % will
be provided by the owner/producers of CBD. The proposed activities will
provide the basis for the development of the biodiesel production
facility and the marketing of the facility to area producers and the
marketing of the biodiesel and the by-products of glycerin and feed
stock.

GOALS OF THE PROJECT

RD Instruction 4284.910c(5)(iii) Goals of the Project. A clear statement
of the ultimate goals of the project. There must be an explanation of
how a market will be expanded and the degree to which incremental
revenue will accrue to the benefit of the agricultural producer(s).

Example #1

Markets will be expanded

Cheese Company entered the whey products business in 1991 and began
producing

edible grade lactose in 1994 and since then has expanded and improved
the whey business to

produce 26 million pounds of whey protein concentrate and 94 million
pounds of edible lactose

annually. New manufacturing technology has improved production
efficiency and created new

product streams that were once considered waste. Research has
demonstrated one of the streams

can be modified into a highly effective animal feed and would add
diversity to our products. As

part of a focused strategy, the company wants to diversify into modified
whey carbohydrate

animal feed. This strategy involves the understanding the market and
creating a business plan.

The goals of the project are to:

1\. Complete a market analysis

2\. Develop a business plan.

Degree to which incremental revenue will accrue to the benefit of the
producer

Modified whey carbohydrate animal feed will benefit the producers in
many ways. Selling this

product will create a revenue stream and eliminate the cost of disposal.
In addition, many

producers may also be end-users and purchase the cost effective feed for
use on their farm.

Market expansion through the market analysis

Focusing on California Secondary on Western United States

o Define the West Coast markets for modified whey carbohydrate livestock
feed in terms of product types/variants potential additives, annual
usage, current customers and suppliers.

o Analyze market sizes and market trends/dynamics as a basis for
understanding market potential.

o Evaluate the marketing environment in terms of competitive activity,
and competing products, entry barriers, product specifications, etc

o Identify market requirements in terms of price and distribution

o Locate potential distribution channels

Modified Whey Carbohydrate Animal Feed

o Develop potential promotional strategies including marketing and
advertising.

o Propose potential opportunities and strategies to address them for
cheese company

Revenue projections through business plan

The business plan will identify the revenue projections.

o Choose best product mix

o Identify Target Species

o Design Process of Manufacture

• Develop a marketing budget

• Analyze the cost of sales

• Calculate overhead

• Project cash flows

o Calculate Cost of Production

o Acquire commitment of capital expenditure

Example #2

GOALS OF THE PROJECT

The goal of this project is to add value to dairy waste presently
generated on a 900 cow dairy by processing it into a high-quality
compost product. This would benefit the enterprise two fold: by reducing
or eliminating a potential liability with the current system of
disbursing the product onto farmland for fertilizer and soil nutrients.
The second benefit is to provide Dairy mc. an additional source of
revenue from a value added product.

Example #3

Peach Packers\' ultimate goal is to add value and increase profits by:

1\. packaging peaches in heat-fom1ed clamshell packages to minimize
bruising, eliminate the contamination risks associated with in-store
handling, and increase shelf life;

2\. taking advantage of the possibility created by our packaging to
offer riper, sweeter peaches; and

3\. marketing our \"Tastier Peaches\" in a campaign targeting
merchandisers, retailers and consumers.

This planning grant provides Peach Packers with intermediate goals to
serve as a springboard for achieving our ultimate goal. Our intermediate
goals - to be achieved by the activities in this proposal - are to
outline a streamlined operation in which no extraneous effort or
expenditure remains and to carefully strategize a debut that will
intensively develop this new market and realize dramatically increased
profits right away.

The proposed venture is ideally situated to initiate extremely rapid
expansion of a new market. No similar peach product has ever been
available in our East Coast market, making this an entirely new market
At the same time the obvious and myriad benefits to merchandisers,
retailers and consumers have been successfully demonstrated with apples,
tomatoes and pears in heat formed clamshells. Consequently, our specific
application enjoys the novelty of innovation, while the general form
lends the secure, tried and true comfort of familiarity. Further,
crossover from traditionally packed and marketed peaches to our
\"Tastier Peaches\" requires no change in facility, technology or
equipment for merchandisers and retailers, and offers both decreased
labor and increased profits. Crossover for consumers is likewise
uncomplicated in that our \"Tastier Peaches\" - unlike frozen, canned,
sliced or otherwise processed fruit - are simply premium fresh peaches
suitable for all conventional uses.

When such a superior product with such broad appeal for merchandisers,
retailers and consumers is made available with no investment beyond the
purchase price, the natural and expected outcome is swift expansion of
the market followed by steadily sustained demand. Through careful
planning from our debut and intensive development of the market through
prudent increases in production of \"Tastier Peaches\", Peach Packers
will seek to ensure that at no point is supply likely to exceed demand.
Our profit per pound for this value-added product is approximately \$
more per pound over our conventional product. So in the first year
following completion of our business and marketing plans, \* expects to
sell approximately \* pounds of our \"Tastier Peaches\" for an increase
in profit of \$ in the second year \* pounds for \$ and in. the third
year \* for \$. The entire amount of this three year total profit of \$
will go directly to our independent owner-producers.

PERFORMANCE EVALUATION CRITERIA

RD Instruction 4284.910c(5)(v) Performance Evaluation Criteria.
Performance criteria suggested by the applicant for incorporation in the
grant award in the event the proposal receives grant funding under this
subpart. These suggested criteria are not binding on USDA.

Example #1

Cheese Company will have a complete market analysis and business plan by
September 2005 and be prepared to enter the manufacturing phase in 2005

Example #2

Potential market: Establishment of suitable wholesale and/or retail
market for the volume of compost produced. The report would include a
geographic listing by SIC or NAICS code of the number of available
commercial prospects and a letter of intent from a partner(s) to
purchase the product.

Product pricing structure: This market analysis would reveal a pricing
matrix that would reflect the market value of the product based upon the
criteria of product quality. A product that met higher standards in
nutrient or other values would command a higher price. Also a key
variable in the market discussion is the effect of transportation costs
in order to move the product to the end user.

Cost analysis: Develop a unit cost for the production of compost on a
per ton or per cubic yard basis. This would consider capital costs as
well as operational expenses.

Capital infrastructure needs: A specific system would be selected from
the various possible options and a listing of this equipment and
systems. This would include a use of capital funds table with a detailed
itemization of the capital investment required. Preliminary estimates
indicate that capital costs for equipment could be in the neighborhood
of \$500,000.

Example #3

The primary evaluation criteria that should be used to gauge the success
of this grant is the project\'s expected and actual return on
investment. To attract sufficient capital for full development of the
project, we must be capable of generating returns on investment in
excess of 20%. If we cannot reasonably assemble a business model capable
of achieving that type of return, we won\'t attract sufficient capital
to form the business and construct the plant. Should that be the case,
other benefits are moot because they will not be realized without the
existence of the plant.

Our primary strategy is to procure low-cost feedstock, convert it into
higher value biodiesel, and reward participating producers through the
distribution of financial returns from the biodiesel plant. Supporting
strategies are intended to minimize cost of production or create product
quality advantages. These supporting strategies may: involve location of
the plant close to feedstock sources, use of processing economies of
size and scale, use of unique technologies, sharing of resources with
sister organizations, use of quality programs, etc. Regardless of the
activities that are pursued or the extent to which they\'re achieved, in
the end, the measure that best reflects the extent to which we've
achieved success with those strategies, is the company's return on
investment.

Other performance metrics such as increased demand for a commodity, or
the creation of new markets are important, but they are secondary to the
biodiesel plant\'s overall financial return.

PROPOSAL EVALUATION CRITERIA

Nature of the proposed venture

RD Instruction 4284.913(a)(1) Nature of the proposed venture. Projects
will be evaluated for technological feasibility, operational efficiency,
profitability, sustainability and the likely improvement to the local
rural economy. Points will be awarded based on the greatest expansion of
markets and increased returns to producers. Evaluators may rely on their
own knowledge and examples of similar ventures described in the proposal
to form conclusions regarding this criterion.

*Applicants must carefully explain what the proposed venture is to
accomplish including how the applicant will add value to the products
they produce. The applicant must describe the technology that will be
used (including examples of the technology being used elsewhere). They
must also describe how the customer base (demand) for the value-added
product will be increased, and explain how they expect that the project
will produce additional profits for the*

*producer-owners of the venture. Thus, the reviewer must address three
elements for this criterion:*

\(i\) reasonableness (including sustainability and viability) of the
venture,

\(ii\) whether or not it will increase the demand for the product the
producer(s) are producing, and

\(iii\) whether or not the producer(s) will increase their net return
from the venture.

If the applicant is a cooperative, Agricultural Producer Group, or a
Majority-Controlled Producer- Based Business Venture, the proposed
venture must focus on an emerging market which is defined as a new or
developing market for the applicant. That is, a market the applicant has
not traditionally supplied. Again, reasonableness is the controlling
factor. More points should be awarded to ventures with proven technology
that have a good chance of being both viable and sustainable. More
points should also be awarded to proposed ventures that will expand the
customer base and return more profits to producers.

Example #1

Technological Feasibility

The Cheese Company currently produces a variety of "co-products" from
the whey. Dr.

\* has developed innovative methods using new technology to produce

pharmaceutical grade lactose from edible grade lactose from its whey
co-product stream. In

addition, research conducted in association with Agriculture
Laboratories has shown

potential to create a modified whey carbohydrate product for the animal
feed market. These

issues, along with modified processing capabilities, have introduced new
streams and

opportunities to develop markets from modified whey carbohydrates
livestock feed.

Operational Efficiency

Full utilization of all milk components is essential to efficiency.
Currently, this co-product

stream is utilized for other products. However, future growth
projections will exceed demand for these products and diversification is
required.

Profitability

Initial investigations into this business demonstrate an increase in
profit margin over current uses as a fertilizer and soil amendment.

Sustainability

Whey is a co-product of cheese. Whey carbohydrate livestock feed is
produced from a

continuous source of whey and will be a sustainable business.

Improvements to the rural economy

The use of whey carbohydrate as a livestock feed benefits the rural
economy by processing a

potential waste product for a viable use, providing cost efficient feed
and creating local jobs in

marketing and distribution.

Agriculture commodity, process and description of value-added product

Modified whey carbohydrate animal feed originates from cow's milk. As
the milk is processed

into cheese, the whey is drained and filtered. During reverse osmosis
and ultra-filtration, various

product streams exist including protein, lactose and the stream with
carbohydrates best suited for livestock feed. The end product is a
nutrient rich stream that has been used is currently used as a soil
amendment and foliar spray. Analysis of this stream found that not only
does it positively alter micro-organisms in the soil and in the leaf
environment; but also enhances the microorganisms in the rumen of beef
animals. In 2003, feed trials conducted at feedlot in \*, California,
demonstrated positive results and the potential for developing a new
animal feed business.

References and similar projects

Various literature reviews have been conducted during the research phase
of this project. The

reference review began in 2001 searching for information regarding whey
carbohydrate uses in

plant applications and moved to conducting a literature review for whey
applications in feeds.

New Zealand produces a similar product called "Proliq" and Australia
produces a similar product known as "Delac."

The Lactose Company of New Zealand Ltd, published "Proliq, The Liquid
Stock Food,

Properties and Applications (1988)," providing a detailed manual on how
to assist in the use of

Proliq on farms. The chemical properties and biological value of Proliq
is similar to the whey

carbohydrate feed proposed in this venture demonstrating the successful
use in another country.

"Utilisation of the Waste Product Delac in Cattle Diets -- Final Report
on the Dairy Research and Development Corporation" by A.G. Kaiser, JW.
Piltz, MA Friend and M.N. Silence conducted at the Charles Sturt
University. This reports state, "Once considered as a waste-product
Proliq is now considered a co-product of lactose production. It is sold
for 9 cents/liter to local dairy farmers and is now a significant
revenue earner for Lactose New Zealand. It is an energy
supplement...enabling farmers to either increase stocking rate or
improve cow condition over summer."

"Industrial Pollution Prevention Case Study: Food Sector. Recovery of
Cheese Whey for Use as

an Animal Feed, (Misr Company for Dairy and Food, Darmietta, Egypt (July
1999) describes

similar ventures in Egypt. In the United States, David J. Schingoethe,
South Dakota State University, published an abstract "Feeding Whey and
Molasses" discussing the potential use of whey as a source for
fermentable carbohydrates.

"Affects of \* on plant growth, soil micro-organisms, and nutrient
availability into

agricultural soils" by Nannette Cooper, TA Knauf and Joe S. Mullinax
(2003) led to the potential use of the product as an animal feed.

Careful literature review and conversations with research scientists and
livestock producers

indicate that this project will be successful.

Cost and availability of inputs

Inputs are readily available without any additional manufacturing costs.

Type of markets

The purpose of the market analysis is to explore the best type of
specific market (dairy and/or beef cattle and age).

Number of potential customers

According to the 2002 USDA agriculture census California had 1679 farms
with more than 100

head of beef and 2,150 dairies. Livestock and dairy producers will be
potential customers.

Cost of processing the commodity

The final cost of processing the commodity (mixing, nutrient additive or
other component if

necessary) will be determined in the business plan.

How much value will be added:

The market analysis and business plan will determine the exact amount of
value that will be

added; however, early estimates suggest that the product could create
over one million dollars

annually in value

How value will be distributed

The value produced by this product will be divided between Cheese and
the end users of

the livestock feed product.

Non-monetary value that could be obtained by end users of the product

Livestock and dairy producers using the feed may experience improved
animal health and feed

efficiency.

Example #2

Technical feasibility- There are several methods of producing compost
using different processes and technology. An evaluation would be done of
each method and the merits of each in the given application. Some
methods may be more capital-intensive while others are more
labor-intensive. This analysis will focus on obtaining the correct
system for this specific application.

Operational efficiency- the system must be sustainable over the long
term as it will need to produce marginal revenues which are over and
above marginal costs. There is also a human resources component in
analyzing whether existing Dairy Inc. employees can be deployed on this
operation or if additional labor and management will be required.

Profitability-will be achieved by the selection of specialty markets
which maximize revenue.

Those markets that will be most attractive are those that appreciate a
high quality, high nutrient value product and would be willing to pay
for such.

Sustainability-there are two elements of sustainability which include
environmental concerns as well as financial. First an expanded market
for value-added products minimizes or eliminates the concern regarding
repetitive application of raw livestock waste on crop production ground.

Secondly, from a financial perspective any capital investment must be
for equipment and systems that have a usable life of sufficient length
so that these initial costs can be amortized over a substantial period
of time.

Effects on rural economy-over the past 10 years Dairy Inc. has had a
very positive economic impact in \* County. This entity has created or
retained 15 full-time jobs and has purchased significant production
inputs from the local area. A feasible compost production system would
provide additional jobs to the area as well as circulate additional
money into the local rural economy.

Example #3

Nature of the Proposed Venture

Introduction

The proposed plant would be a small 3 to 5 MW baseload, renewable
energy, combined heat & power plant utilizing at least 165 tpd, selling
not at generator prices but at wholesale prices (distributed generation
rates). The plant maximizes revenues by producing electricity for the
local institutional facilities within the institutions property limits
(or within 20 yards outside of the limits) thereby bypassing
transmission fees and large utility profits which depress revenues. The
plant would be fueled by a current waste - wood chips generated from
land clearing \-- thereby capturing opportunities for renewable energy.
The maximum or peak demand for the City of is 15 MW; however the
capacity utilization at peak level is quite low and thus better served
by the wholesale grid. Instead, the company will focus on a maximum of
about 3 MW of the prison\'s baseload power.

Revenue is earned from the sales of electricity, heat, and renewable
energy & tax credits from REC\'s and the federal production tax credit
for closed loop biomass systems. The electricity and thermal energy
sales would be secured as Letters of Intent prior to applications for
financing and secured as Power Purchase Agreements prior to the close of
financing. Thermal energy revenues (projected at 30-50% of total) and
price risks will be hedged with NYMEX natural gas contracts and forward
pricing.

This project proposes to add value to local sources of Mesquite and
Huisache that are considered to be a waste (having no financial or
established value) or a cost (expense to cut down the Mesquite and
Huisache and then bum it) by converting the resource into wood chips for
use in biomass energy plants. This allows producers to convert raw
resources that are currently an expense into a revenue stream with
tremendous upside potential.

Other benefits to this new value-added agricultural renewable energy
project include:

-   Avoidance costs to the farmers in terms of fuel to bum the pile as
    well as labor costs.

-   Avoidance of risks associated with run-away fires from burning
    woodpiles created from land-clearing.

-   Improved grass land production from land not burned/scorched. This
    in turn facilitates in increased forage production per unit of land.

-   Reduction of Mesquite and Huisache pollen, particulate matter,
    Carbon monoxide, and Volatile Organic Compounds released into the
    environment from open field burning, thus improving air quality
    (reduced Huisache pollen).

-   Reduction in disease transmission risks from tree to tree by
    decreasing the extreme densities of a single species on
    non-productive lands.

-   Reduction in the water demands of high density tracts of Mesquite
    and Huisache or Mesquite trees, thereby diminishing the stress and
    increasing disease resistance of the remaining trees.

In County, \*, a large amount of acreage is cleared each year for
grazing land and the resulting wood is burned in piles. The American
Forest Resource Council reports particulate matter produced by
prescribed fires is 40 lbs per ton of woody biomass burned as compared
to 0.13 lbs per ton when burned through a power plant. The council also
reports that Volatile Organic Compounds (YOC\'s) are 19.51bs/ton in
prescribed burns versus 0 lbs/ton in power plants, and 252 lbs of Carbon
Monoxide (CO) in prescribed fires as compared to 3.2 lbs per ton in
power plants. The net impact of this project (potentially 60,000 tons of
wood chips or 6,000 acres/year) would be to save the environment 7,500
tons of CO, 585 tons of VOC\'s, and 1,200 tons of particulate matter.
These numbers could be easily replicated across the rural southwest if
more revenues can be identified to support the expenses of procuring
biomass.

This project will produce the fuel from wood wastes such as Mesquite and
Huisache (the species which is ashe juniper) in central \*. Ranchers
regularly clear these trees in order to increase forage levels for
livestock production. The practice has received increased funding in
recent years from the USDA\'s Natural Resources Conservation Services
division as well as the State Department of Agriculture.

Technological Feasibility

Eighteen biomass power plants were reviewed in the USA by G. Wltsee in
the report \"Lessons Learned from Existing Biomass Power Plants\"
(February 2000, NREL report - NREUSR-570- 26946). All of the plants
studied were constructed between December 1979 to January 1998. The
plants range in size from 10 MWe to 75 MWe. The locations of the
American .plants are in California (6), New England (3), Washington (4),
with Wisconsin, Virginia and Michigan having one each. The four
co-generation plants in the report are also recent plants making use of
the latest technology. Some of the lessons learned in the research from
previous plants are as follows:

-   The highest priority at most biomass power plants is to obtain the
    lowest-cost fuels possible. This involves tradeoffs in fuel quality,
    affects the design and operation of the system, and frequently is
    limited by permit requirements. At the McNiel Station in Vermont,
    long-term fuel supply contracts insisted on by the financing
    institutions created some costly problems, and the plant now runs
    more economically by buying wood fuel under short term contracts.

-   Difficult to burn agricultural residues were included at a Florida
    plant, but needed to be mixed in small percentages with better
    fuels, primarily wood

-   The Tacoma WA plant found that focusing on fuel cost (cents/kWh)
    rather than fuels that provide the highest efficiency (Btu/kWh) and
    saved the plant \$600,OOO/yr.

-   Opportunity fuels (with tipping fees) can eliminate fuel costs,
    generate net revenues. Fuel procurement should be one of the highest
    priorities and a full time job.

The one area of a biomass power plant that can almost be counted on to
be mentioned in response to the question \"have you had any significant
problems or lessons learned?\" is the fuel yard and the fuel feed
system. Most plants in this report spent significant time and money
during the first year or two of operation, solving problems such as fuel
pile odors and heating, excessive equipment wear, fuel hang-ups and
bottlenecks in the feed system, tramp metal separation problems, wide
fluctuations in fuel moisture to the boiler, etc., or making changes in
the fuel yard to respond to market opportunities. Key lessons learned by
plants in fuel handling are:

-   At Shasta (CA) the operators learned to blend all the fuels into a
    homogenous mixture that allowed the boilers to fire at a constant
    rate and maintain maximum load under all conditions, without
    violating environmental standards, excessively corroding heat
    transfer surfaces, or slagging beyond the point where the boilers
    required cleaning more than twice per year.

-   Selecting a proven fuel system is important.

-   Not letting fuel in piles become greater than 1 year of age, thereby
    eliminating odor problems.

-   Grinders do not normally produce a product that has good. flow
    characteristics. The wood fibers are sticky, stringy and elongated
    when produced from a grinding operation. The fuel product needs to
    be processed by equipment that produces a chip.

Many biomass plants change fuels significantly over the years, as
opportunities arise or old fuel sources dry up. These changes are often
not predictable. The best strategy to deal with this problem is to have
a plant design and permits that allow as much fuel flexibility as
possible. The emission control system with a lime spray dryer and
baghouse can remove almost any significant pollutant encountered in
these wastes.

Transport costs become very significant after about 20 miles, and
usually prohibitive beyond 100 or 200 miles. The objective of the plant
is to have waste/fuel generators deliver the fuel to the plant site at
their own expense. The most successful projects have developed formal or
informal partnerships with their key customers and suppliers.

In a study performed the Antares Group for the USDA, DOE and NREL, a
model was proposed to utilize the enormous amount of \"ladder fuel\"
that is causing significant forest fires across the USA\'s BLM and
Forest Service, territories. The report analyzes the potential
profitability of \"biopower plants\" producing electricity for the
wholesale market. This report reveals that in most cases, a biopower
plant run solely on the 100 tpd of [thinnings]{.underline} cannot be
competitive on a pure market basis (2003), with no incentives or
subsidies, and regardless of technology. However, the exceptions to this
conclusion are those biopower plants that have a combination of low
biomass feedstock price, low capital cost, and high existing alternative
power (coal) prices. This report also shows that regardless of
technology, the delivered cost of biomass has to be a maximum of \$10
per delivered ton to be competitive in most scenarios. This report does
show that there are \"economies of scale\" for the biopower
technologies. Larger biopower projects have better economic profiles
than smaller projects. The main conclusion is that both solid fuel
co-firing and combined heat and power technologies have positive
economic opportunities for relatively large scale operations requiring
over 600 tpd of green woody biomass. Combined heat and power siting
opportunities would likely serve new or existing industrial or
commercial facilities. These sites would be located in rural areas, near
public lands capable of supply greater than 100 tpd of biomass and would
have access to supplemental biomass suppliers to achieve scale
economies. If these conditions are available at a location, then both a
positive project economic opportunity is possible and the public
objectives stated in the federal government\'s MOU signed on June
16,2003 could be attained.

The conversion of biomass into thermal energy and electricity is
accomplished with off the shelf technology readily available from
companies such as:

-   Advanced Recycling Equipment - St. Mary\'s, P A

-   Earth Care Products Inc., Independence KS

-   Chiptec, South Burlington, Vermont

-   Wellons, Vancouver, W A

-   Engineered Products of Idaho, Coeur d\' Alene, Idaho

Operational Efficiency

The wood supply aspect of collecting waste trees from ranches and
converting them to chips for hauling to the processing facility is the
largest hurdle in developing the industry. While all of the equipment is
commercially available and much of the labor can be subcontracted to
local/regional vendors, this particular operating model for the removal
of wood waste from ranch clearings and subsequent transport to a
processing facility has not been previously applied. The risk could be
mitigated by the use of wheeled loaders (JD 463G) with forestry shears -
which require fewer operators and less maintenance per unit of
productivity than bobcats which are currently used by land clearing
companies. The loaders would deliver trees and limbs to the tree
grinders (Morbark 4600 with tracks), and 10-ton buggies (Sunflower 8210)
with tractors (JD 8230) will transport wood chips from the grinders to
the ranch road where the commercial road trailers would be waiting.
Tractors and buggies reduce field traffic by inexperienced highway
transport drivers and can be outfitted with thick airplane tires to
prevent flats due to cactus plants.

The long-term availability of adequate waste wood is a critical issue
that this planning grant will evaluate. For this project to be
sustainable there must be a 20-year supply of trees readily available
which would require 120,000 acres (6,000 acres/year) when operating at
100% capacity.

To put the 6,000 acres/year in perspective: the state of Texas wants to
see 910,000 acres cleared of Mesquite and Huisache and Huisache trees in
the San Angelo area alone and has already paid to have 493,000 acres
cleared. Thus, the continuing need to clear land creates a supply of
waste wood and provides confidence that an adequate supply of waste wood
will be available.

Furthermore, the local USDA NRCS has provided EQIP program funding for
removal of Mesquite and Huisache trees for the county and the Leon River
Restoration Project. More grass means the land can support more beef,
sheep, goats or deer, and therefore a higher income for the rancher.
Many landowners also wish to restore the land to pre-settlement
conditions in which the Mesquite and Huisache were less prevalent The
venture also provides an excellent opportunity for the community to
learn more about biomass supply for future\' opportunities in
lignocellulosic conversion of biomass to produce fuels.

The business of owning ranch land is capital intensive. The rewards from
production agriculture are poor. The typical cost of treatment for tree
removal ranges from \$75 to \$105/acre. The typical method, known as
mechanical removal, is to contract a local company to work with
bulldozers to push the trees into small piles. The bulldozers use their
tracks and blades for leverage against the trees, considerably
disrupting the ground cover (grasses), as well as deep knives which
penetrate the ground to sever tree roots. Normal recovery time for the
land is 2-3 years, and the benefits of the treatment last 10 years
before a repeat treatment is required. The use of rubber tired loaders
with forestry shears instead of bulldozers is increasing in popularity,
as they are less destructive to the land surface and better at removing
the total root system of the trees.

Mesquite and Huisache trees limit the amount. of grass that can be
grown. Huisache trees are widely believed to hold tremendous amounts of
water within their root balls. In dense Huisache groves, virtually no
grass can be found because of the acidic needles falling on the ground.
The removal of the Huisache trees significantly increases flows of
surface water, enhancing local water reservoirs, and diminishes the
risks of erosion by increasing the percentage of ground covered by
native grasses. Mechanical removal is supported by environmental
organizations interested in improving endangered species habitats, but
as a treatment solution it suffers from the fact that the wood wastes
created must be burned in order to expose the ground otherwise covered
by the woodpiles, and to improve forage production. Burning contributes
heavily to carbon monoxide (CO)\~ volatile organic compounds (VOCs),
particulate matter (PM), and methane emissions, negatively impacting air
quality.

As the USDA decreases the flow of funds for direct subsidy production
agriculture through its FSA arm, it is expected to increase its funding
for the environment through its NRCS arm. The continued improvement of
rangeland grass production would be a direct subsidy to increasing
surface water flows and environmental quality, as well as an indirect
subsidy to the ranchland animal production of deer, cattle, goats and
sheep.

Harvesting operations from woodpiles during the hunting season November
and December), rainy season (.March and April) and hot summers (July and
August) would be intermittent. These seasons of less harvest would
require gathering and storing a larger quantity of wood chips from
ranches in the remaining months, while also utilizing a higher level of
operating efficiency during the months.

The process of harvesting the wood chips from dormant clearing piles,
begins with an excavator (ill 2l0CW) with a grapple claw, placing the
sheared tree into the hopper of a mechanized grinder (on tracks). The
grinder is remotely controlled by the operator of the excavator and
shreds the tree into 2-3\" pieces, which are then conveyed to one of two
la-ton buggies cycling between the shredder and the transport trailers.
The continuous cycling of the buggies to the trailers eliminates the
need for truck drivers to enter fields and simplifies their role to
\"pick up and go\".

Biomass arriving at the processing plant is sorted for oversized chips
and magnetic debris. The oversized pieces are diverted to a separate
grinder for pallets and other materials such as construction and
demolition wastes, which produces acceptable chips. Acceptable chips are
placed in a pile for further drying. On a daily basis, wood chips are
removed from the piles, and be reduced to 1;2\" size chips by a
secondary grinder which can then be fed to a hammer mill for production
of wood flour (1/8\" size chips), depending on the technology chosen to
match the clients needs. The wood flour (1/8\") is conveyed to overhead
dump bins for the delivery trucks to transport to the processing site.

Should the client\'s site be away from the processing center, an auger
transfers the biomass from the truck dump into a bin with a capacity of
50 tons, which holds three transport loads. The biomass is continuously
fed into a fuel metering bin and then blown to the burner apparatus.
Maintenance and monitoring are performed by the delivery person during
the deliveries.

Profitabilitv

Recent Sunergie studies which focus on the thermal energy production
sales and investment only, project that waste trees can be collected and
processed into wood fuel for about \$3.50 per mmBtu (variable costs).
The fixed costs for management and maintenance are \$1.40 per mmBtu.
Depreciation and interest charges are projected to be \$2.10 per mmBtu,
for a long term operating cost of \$7.00 /mmBtu before taxes. The short
term break-even cost is expected to be \$4.90/mmBtu.

The annual average delivered natural gas price when incorporating a
reasonable price hedging strategy will be approximately \$9.00 per mmBtu
(\$9.00 plus \$1.00 transport tariff, blended futures forecasts minus a
general basis of \$1.00) thus leaving approximately \$2.00 per mmBtu
difference.

The project would seek baseload customers with thermal energy needs of
24 hours, 365 days/year. Baseload customers provide for the efficient
use of capital and operating expenses. Typical customers are large
institutional facilities such as the Department of Correctional prison
facility housing 9,000 inmates, and the Military base located south of
\*. Electricity production would be combined with steam sales (i.e.,
waste from turbines) for potentially profitable opportunities as
highlighted by (reference earlier study).

Natural Gas commodity markets such as NYMEX\'s Henry Hub are the key
price makers for thermal energy, and thus for electricity as well.
Clients normally pay a derivative of the \"month ahead firm delivery\"
market price, which includes a \"basis difference\" between the NYNIEX
price and their nearest market hub, plus a fixed transportation cost
from that hub to their facility. The plan is to compete directly on the
delivered price by offering a standing discount on the fixed
transportation cost that a client pays for natural gas delivery.
Furthermore, the project expects that it can attenuate significant
volatility by providing a maximum pricing window that will likely help
minimi7:e the risks to a client\'s cash flow. The window will adjust to
medium-term changes in the marketplace (i.e., 3 months of sustained
higher or lower pricing). Finally, clients will be offered the
opportunity to forward-contract their purchases up to a maximum of 6
months in advance, based on the NYMEX futures quotes.

The project can offer the following sales advantages:

-   Pricing discounts from current natural gas and electricity options.

-   Flexibility in pricing according to different Natural Gas pricing
    hubs (i.e. W AHA vs Henry Hub) providing clients with new savings
    opportunities.

-   Diversifying the client\'s energy options.

-   Capital costs of the equipment and installation are included in the
    discounted energy sales

-   price, thereby eliminating discussions about payback period.

-   The environmental attributes (i.e., renewable energy).

-   Price according to the Btu\'s delivered to the client, thus
    eliminating the local manager\'s. concern about BREP operating
    efficiency and fuel quality.

Sustainability

This project addresses sustainability in three ways:

Environmental Sustainability is achieved using a readily renewable
resource, Mesquite

and Huisache, for production. The process also adds additional nutrients
to the soil, and diminishes the risks to erosion by not extracting the
roots from the soil structure. Further, the use of rubber tires instead
of steel tracks used in scraping, leaves a far higher percentage of
grasses and forbs in place. The project target using approximately 1% of
the county\'s sustainable landmass per year with the assumption of 20
years necessary for the re-growth of the Mesquite and Huisache trees.

Economic Sustainability is achieved by providing the no-cost removal
(diminished costs and risks) of Mesquite and Huisache wood chips from
ranches to the producer\'s company. The company will be able to attain
generate significant mar\~ when hedging the value added energy with
NYMEX futures contracts.

Business Sustainability is achieved by building on the foundation that
will be created with

this new renewable energy technology. By introducing this new technology
regionally and moving into new markets, the company is assured an
accelerated, yet stable, road to a significant niche market presence in
the region. .

likely improvement to the Local Economy.

The industry is important to the community because it-will help the
community to attract new jobs by providing a competitive advantage
(lower cost energy arid energy price stability) to industrial users. The
community is presently at a disadvantage because of the gas line
capacity reaching the community. The project anticipates providing
approximately 9 low-skill and 1 managerial job for the collection
activities, and 4-5 high skill jobs (engineers on 24/7 activity levels)
for the generation and energy conversion activities. Ancillary jobs
include the transportation of biomass by transport trailers (6-8 jobs)
to the processing center.

Further, the majority of residents in rural communities live on low to
median income levels. As energy costs are the most rapidly increasing
component of price inflation, their disposable income diminishes. These
communities are at risk. This project would divert a minimum of \$4
million per year in energy expenditures out of the county, back into the
local economy. This provides for a significant multiplier effect,
reduces costs for ranchers, and can bring in new jobs.

Finally, a biomass plant may offer opportunities to divert local woody
wastes to the plant, thereby diminishing the costs of landfill. City
sewage sludge could be mixed with ash from the burners to create a new
form of fertilizer; cardboard and paper wastes could be mixed with wood
chips to create fuel; local construction wastes could be reduced to
fuel. All of the above would save the community members producing those
wastes, significant tipping fees, while reducing the quantity of
landfills used each year.

Qualifications of those doing the work

RD Instruction 4284.913(a)(2) Qualifications of those doing work.
Proposals will be reviewed for whether the personnel who are responsible
for doing proposed tasks, including those hired to do studies, have the
necessary qualifications. If a consultant or others are to be hired,
more points may be awarded if the proposal includes evidence of their
availability and commitment as well. *Most applicants will not
specifically identify a company or individual who will actually conduct
the planning activities. For those applicants that do, look to see if
the credentials of those identified to do the studies are provided,
including education and experience. For those applicants that do not
identify a specific company or individual, see if they at least
understood the need for an independent entity to conduct the planning
activities. Also see if they identified the general type of entity
needed to conduct the planning activities, such as a university. A
specific company or an apparently qualified individual identified will
score higher than a general entity identified which will score higher
than the recognition that an independent entity is needed which will
score higher than no discussion at all. Applicants should not receive
credit for feasibility studies, marketing plans or business plans that
will not be conducted or developed by independent third parties. For
other tasks such as accounting work or clerical work, the applicant may
provide those services and be considered qualified if such
qualifications are demonstrated.*

Example #1

Consultant: Analytical Laboratories

Analytical Laboratories formed in 1975, in \* California. \* labs began
as a soil laboratory and has developed into the only full service
agricultural lab on the \* currently tests soils, plant tissue, water,
feeds, plant pathogens, composts and manure. The state of the art
facility located in \*, Ca., offers the latest test procedures and
equipment including NIR, full Wet Chemistry, and In Vitro analysis. The
staff offers expertise from dairy nutrition to graduate degrees in plant
pathology.

Lab also offers in-house custom research. The company has conducted over
50

published and private research papers ranging from plant pathology to
animal nutrition. The

facility features a research greenhouse and our own herd of fistulated
dairy cows (live dairy cows with direct access to the rumen). Lab is
certified by North American

Proficiency

Testing Assoc., the National Forage testing Assoc., the American
Phytopathological Society and

Family Farm Alliance.

Example #2

Consultant-\* of Consulting Group will be the lead consultant on this
feasibility and business planning issue. His resume includes over 10
years of business and feasibility planning with various types of small
agricultural and commercial businesses. He has significant exposure both
educationally and professionally to production agriculture. He has a
Bachelors of Science degree in agriculture from the University of \* as
well as a Masters of Business Administration from \* college. He has
significant experience in the financial aspects of production
agricultural operations including dairy farms.

Specifically his experience involves counseling small firms regarding
business planning issues including market research, financing,
feasibility and operations.

Following is additional work experience information:

Business Consultant; (1995 to present) Consulting Group a sole
practitioner practice. Practice developed following a relationship with
the Business Development Centers at Tech and College working with their
clients. Currently have a contract for feasibility and business planning
for the Iowa Abilities Fund/Entrepreneurs with Disabilities and 1st Step
Program as well as other private clients. Following are the main areas
of practice:

Startup consulting: Work with potential business owners on an assessment
of their skills followed by business concept development, market
research, product development, and feasibility analysis.

Business valuation: Provided clients with detailed analysis of business
value including establishing purpose of valuation, gathering of
information, leading client through the entire process, industry
research, financial analysis, and authoring detailed report for the
client.

Feasibility and Business Planning: Develop detailed, business plans to
serve as a road map to the future of both startup and existing small
businesses. Includes meeting with client to understand and refine
concept, provide guidance on planning process, market and operations
research, develop consensus among stakeholders, financial projections,
oversee and/or write and edit final draft of business plan.

Educational Background: MBA from College 1997. Bachelor of Science in
Agribusiness from University of 1986.

Dairy Inc. President \*- has a 25 year career in this family operation.
When he took it over approximately 15 years ago it was a 150 cow dairy
operation with one outside employee. Through a series of expansions it
has grown to a 900 cow operation with 15 employees. In addition to
building this enterprise he has served the dairy industry through his
involvement on and regional and national boards and committees. This has
allowed him to be connected to those individuals and organizations that
are on the leading edge of the production dairy industry.

Example #3

Corn Cooperative

Corn Co-op has strong professional management personnel who will manage
and actively participate in the tasks of this project. A number of
employees may be enlisted to work on specific tasks, but the two key
personnel will be \*, General Manager, who will direct the project, and
\*, Plant Manager, who will manage the entire project and perform tasks
as the \"owner\'s engineer.\"

\*, General Manager, Corn Cooperative

\* has been the General Manager of Corn Co-op since 1995, and has led
the development of innovations and process improvements that have made
Corn Plus the most energy-efficient ethanol producer in the world. Keith
has 24 years of experience in the ethanol industry. He has worked with
multiple alcohol feedstocks, including cheese whey, candy waste and
multiple starches. \* has experience operating biomass boilers to
generate steam, and he has developed, constructed and commissioned a
continuous yeast propagation system. His previous experience also
includes building an upgrading plant to convert spent wines into
anhydious ethanol. \* served in the United States Army from 1970 to 1973
in a Combat Engineer Unit.

-   holds a First Class Engineering License for Steam Generation. \*
    education includes an Associate Technical Degree from Technical
    College in \* and completion of course work at \* Community College
    in \*. He also completed a program in Fermentation and Distillation
    at the Altech Alcohol School in \*

Cooperative Development Services

Cooperative Development Services (CDS) is a 20-year old non-profit
organization created and governed by the cooperative community of the
Upper Midwest. Headquartered in Madison WI, and with a program office in
St. Paul MN, the organization specializes in providing business
development and governance consultation to organizations that seek to
leverage cooperation as a competitive advantage. Relying on a
coordinated team of 30 staff and consultants, CDS specializes in four
sectors:

-   Value-added agriculture

-   Renewable energy

-   Community development

-   Sustainable natural resource management

The primary consultant on this project will be \*, an affiliated
consultant of CDS. \*, Executive Director of CDS, will also participate
in the project.

\*, Principal, \*Consulting, LLC

\* is a business development consultant affiliated with Cooperative
Development Services. His areas of expertise include biomass energy,
value-added agriculture, natural gas and electric energy supply, wind
power, start-up business development, rural economic development,
legislative and regulatory affairs, public and private financing,
corporate due diligence, contract negotiation and administration,
strategic planning and financial analysis.

\* has been an independent consultant since 1995. Prior to 1995, he was
president of a consulting company, a for-profit subsidiary of the
501(c)(3) Center for \* and a financial analyst for the City of \*. \*
obtained a bachelor\'s degree in Economics & Political Science from
College and completed all course work for a Master\'s Degree in Public
Administration at the University of \*

Project leadership

RD Instruction 4294.913(a)(3) Project leadership. The leadership
abilities of individuals

who are proposing the venture will be evaluated as to whether they are
sufficient to support a conclusion of likely project success. Credit may
be given for leadership evidenced in community or volunteer efforts.
*This is from the producer prospective. Look at the qualifications of
the steering committee or the one individual leading the effort. See if
they have experience in business or community involvement. Those
committees or individuals that have a strong background in business,
finance, and the venture's technology should score the higher points.
Those with civic, community, nonprofit, charity, etc., leadership
experience will score higher than those with no history of leadership
responsibility.*

Example #1

The Cheese Company team assembled for this project draws upon wide
technical and

marketing expertise, and many decades of experience in the animal feed
industry. Reference to

their resumes shows proven leadership qualities in guiding companies to
success and technical

knowledge in marketing animal feeds.

Lab brings to the project enormous experience of international market
knowledge, which

will provide the backing data for this refining venture.

Resume of \*

Experience:

1993 -- Present Cheese Company, , California

Vice President Engineering and Business Development

• Design and implement capital projects for plant expansion, process
improvement, and

new products.

• Originate product ideas, research optimum production methods, perform
cost benefit

analysis, and oversee implementation.

Corporate Environmental Officer

• Responsible for air, water, storm water and waste water processing.
Oversee E.P.A.

chemical reporting.

• Member of corporate strategic planning team, whose focus is to
determine long range

business strategy.

1986 -- 1992 Farms, Livingston, California

Senior Project Engineer

• Responsible for managing major capital projects

• Provide technical assistance for all poultry divisions of the company.

1981 -- 1986 \*, California

Vice President and Partner

• Responsible for design, purchasing and production of specialty orchard
equipment.

Education: University of \*

Bachelor of Science, Agricultural Engineering, 1977

Registration: California Professional Engineer

Agricultural Engineering Certificate No. #, 1982

Contractors State License Board License No. B

Example #2

\*- for the past 10 years has been involved in shaping the future
direction of dozens of small businesses. His consultations involve
potential startups regarding feasibility, operational issues for
existing businesses and succession issues for firms in transition. His
specific value

involves a strong network of contacts within dozens of industries and
his ability to obtain reliable information from which to base decisions.
He has a track record of putting together start ups and helping existing
businesses in a consulting capacity. His skill is in keeping projects on
task and

that specific objectives are achieved in reasonable time frames. In
addition his leadership capacities have been enhanced by serving on a
local school board.

\*- is the sole owner of a company that has exhibited significant growth
in the past 15

years. He has shown success in making key decisions that affected the
future of his company. His efforts to increase his operation fivefold
and to hire or retain 15 employees have been successful.

These key decisions were made approximately 10 to 15 years ago and the
enterprise is performing as planned. He also has served on several
regional and national dairy industry boards and is a current local
school board member.

Example #3

Project Leadership

Many experienced leaders are working on this ethanol projects. Those
with an asterisk\* after their name are independent producers.

\* President, CEO and Chairman, has been active in production
agriculture and agri-business for over forty years in Counties, State.
As general livestock and grain operators, he and his wife of thirty-five
years work together with their married sons, \* and \*, and their
daughter, \*. Another daughter, \*, attends Community College.

Ray graduated with honors from \* University with a Bachelor of Science
degree in Agriculture Education and a Master of Science degree in
Agriculture Economics. He has taught Vocational Agriculture at \*, as
well as functioned as a volunteer for \*, (\*, Washington, DC). His
employment has included \* and \* at the \* of \* where he served on it
Board of Directors as well as its Secretary. He presently serves as
President of \* Coop, serves as President, CEO, and Chairman of \* LLC,
serves as Chairman of the Board of Directors of the Midwest Bank, serves
on the Board of Directors of Farm Service Cooperative, and is a member
of Lions Club and County Historical Society.

Ray is a member of both the American and \* Societies of Farm Managers
and Rural Appraisers. He is past chairman of the County Soil and Water
Conservation District.

Commitments and support

RD Instruction 4284.913(a)(4) Commitments and support. Producer
commitments will be

evaluated on the basis of the number of Independent Producers currently
involved as well as how many may potentially be involved, and the
nature, level and quality of their contributions. End user commitments
will be evaluated on the basis of potential markets and the potential
amount of output to be purchased. Proposals will be reviewed for
evidence that the project enjoys third party support and endorsement,
with emphasis placed on financial and in kind support as well as
technical assistance. *There are three types of commitment to be
addressed by applicants. First is the level of commitment from the
producers. Second is the level of commitment from end-users of the
product being produced. Third is the level of commitment from local
government officials, development groups, and institutions of higher
education. For producer commitment, look at*

*the number of producers currently involved, the potential number of
producers that could and should become involved, level of potential
agricultural production relative to the amount needed, and any cash
contributions to help finance the planning needed. The number of
producers should again be reasonable. Stating that all producers in the
state will benefit is not very credible. For end-user commitment, look
for any markets identified, potential buyers contacted, and potential
commitment from end-users. Reasonableness in reaching end-user should be
rated higher than optimistic projections. For local support, look for
referenced letters of support from local and state government, other
grants (non-Federal), and commitments to provide technical assistance or
financial assistance from development groups. (Remember that the letters
themselves should not be in the application, just the assurance they
exist.) More points are to be given for those proposals that address the
various aspects of commitment.*

Example #1

Number of independent producers currently involved

All 20 producers-owners of Cheese Company, Inc. are currently involved
in the project.

Number of potential producers may potentially be involved

In addition to the current owners of Cheese Company, there are
additional family

members entering into dairy production that are eligible for ownership.

Nature, level and quality of contributions

With the exception of this grant request, the producer-owners provide
all funding.

Cash contributions and level of production from the producers

Producers-owners provided 100% of the capital in Cheese Company.

Potential commitment of end-users of the value-added product to be
produced

Customers will receive a high quality, consistent modified whey
carbohydrate animal feed with

exceptional customer service encouraging commitment to the product.

Possible markets

The primary market is California and western states livestock and dairy
producers.

Potential buyers contacted

This grant is to learn about potential customers.

Example #2

Battle Creek Farmers Coop - A letter of support has been obtained in
witch Farmers Coop would tentatively purchase on a wholesale basis a
high-quality composted product produced by Dairy Inc. and market it
threw there fertilizer division located seven outlets in three counties
in northeast Nebraska. Financial support would be provided in that this
firm would purchase the compost product from Dairy Inc.

Organic Nutrient Solutions - \* President- A letter of support has been
obtained in which Organic Nutrient Solutions would tentatively purchase
on a wholesale basis a large volume of high-quality compost product
produced by Dairy Inc.. Financial support would be provided in that this
firm would purchase the compost product from Dairy Inc.

Eaton Floral and Greenhouse-Wakefield NE-Robert Eaton-owner- This firm
is a wholesale and retail greenhouse operation located in Northeast
Nebraska. They have expressed interest in buying a significant volume of
high -quality compost that is superior to a peat based product currently
used.

Fan Separator -Germany- This company has pioneered a mechanical system
that separates and processes solids and semi solids into various
value-added components. This technology has been engineered for use
within the dairy industry. They have been contacted to design and
install the mechanical equipment required.

Example #3

The cooperative has assembled an impressive amount of community support
in a very short period of time, as evidenced by the following, all of
which is affirmed by letters of support and commitment (which are
provided in the Appendix).

In a letter dated March 27, 2006, City Administrator \* of \* affirms
that the City of \* has offered to the Cooperative a 34-acre parcel,
with all utilities and roads for the site of its ethanol plant. Further,
the City has committed to creating a tax increment financing (TlF)
district to provide infrastructure and incentives for the venture. The
City estimates the value of this commitment at \$1 million.

In a letter dated March 28, 2006, \*, Vice President of Operations
Support for \*, Inc., notes that the company is headquartered in nearby
\*, and owns and operates 325 stores in \*, \* and \*, sells over 800
million gallons of gasoline annually, including 80 million gallons of
ethanol. \*\'s need for ethanol is growing, and the company strongly
support the development of the project as it would provide supply close
company operations (thus reducing transportation costs), create jobs in
the area, and boost farmer income.

\*, President and CEO of \* in a letter dated March 28, 2006, commits to
extending a \$ operating line of credit for the venture to fund working
capital to assist in business planning and development expenses for the
cooperative. The line of credit is in effect from October 1, 2006 to
September 30, 2007.

\*, Regional Vice President of Farm Credit Services, expresses on behalf
of Farm Credit Services strong support for development of Wisconsin\'s
ethanol industry through direct financing to members for stock purchases
and financing for plant construction.

\*, Senior Vice President of Bank, in a letter dated March 28, 2006,
expresses support for the cooperative and appreciation for the benefit
that the local economy would realize from development of the proposed
ethanol plant.

\*, President of-the State Bank of \*, similarly voices support for
investigating the feasibility\' of the proposed ethanol plant and notes
the positive impact such a plant could have in shoring up and increasing
farm income in the area.

\*, General Manager of Country Co-op, in a letter on March 28, 2006
expresses his co-op\'s interest in using distillers grains from the
plant in rations for local dairy producers.

Work plan/budget

RD Instruction 4284.913(a)(5) Work plan/Budget. The work plan will be
reviewed to determine

whether it provides specific and detailed planning task descriptions
that will accomplish the project\'s goals. The budget will be reviewed
for a detailed breakdown of estimated costs associated with the planning
activities. The budget must present a detailed breakdown of all
estimated costs associated with the planning activities and allocate
these costs among the listed tasks. Points may not be awarded unless
sufficient detail is provided to determine whether or not funds are
being used for qualified purposes. Matching funds as well as grant funds
must be accounted for in the budget to receive points. *Here the
applicant must state what tasks are to be done, when it will be done,
who will do it, how long it will take, and how much it will cost. The
plan must be comprehensive but easy to understand. Reviewers must be
able to understand what is being proposed and how the grant and matching
funds will be spent. The budget must be a detailed breakdown of
estimated costs. These costs should be allocated to each of the tasks to
be undertaken. Matching funds must be identified and also allocated to
the various tasks proposed. The work plan/budget should be logical,
realistic, and economically efficient. The most*

*points should go to those proposals that best address these issues, and
to those that associate tasks with costs and specific timeframes.*

Example #1

MARKETING ANALYSIS

Define the market with a focus on the West Coast

Analyze market size and potential

Evaluate key competitors and competing products

Identify market requirements

Locate distribution channels

Develop a promotional strategy

Propose potential strategies to pursue

Analysis and write up

USDA Results Report

USDA Financial Status Report

BUSINESS PLAN

Choose product mix

Identify target species

Design the process of manufacture

Calculate the cost of production

Acquire a capital commitment

USDA Results Report

USDA Final Project Performance Report

Example Budget Format #1

+----------------------+------+------+-------+-------+-----+-------+
|                      | S    | End  | B     |       |     |       |
|                      | tart |      | udget |       |     |       |
+----------------------+------+------+-------+-------+-----+-------+
| Task                 | Date | Date | Fe    | Cash  | I   | Total |
|                      |      |      | deral |       | n-K |       |
|                      |      |      |       |       | ind |       |
+----------------------+------+------+-------+-------+-----+-------+
| Task 1 Market        |      |      | \$2   | \$2   |     | \$5   |
| Analysis             |      |      | 5,000 | 5,000 |     | 0,000 |
|                      |      |      |       |       |     |       |
| Labor - Salaries     |      |      | \$    | \$    |     | \$1   |
|                      |      |      | 8,750 | 8,750 |     | 7,500 |
| Labor - Fringe       |      |      |       |       |     |       |
|                      |      |      | \$    | \$    |     | \$    |
| Travel:              |      |      | 2,250 | 2,250 |     | 4,500 |
| Air/Bus/Taxi/Mileage |      |      |       |       |     |       |
|                      |      |      | \$    | \$    |     | \$    |
| Travel: Lodging      |      |      | 1,000 | 1,000 |     | 2,000 |
|                      |      |      |       |       |     |       |
| Travel: Overnight    |      |      | \$375 | \$375 |     | \$750 |
| Meals                |      |      |       |       |     |       |
|                      |      |      | \$1   | \$1   |     | \$3   |
| Outside Services     |      |      | 8,000 | 8,000 |     | 6,000 |
|                      |      |      |       |       |     |       |
| Responsible Staff:   |      |      |       |       |     |       |
+----------------------+------+------+-------+-------+-----+-------+
| Task 2 Business Plan |      |      | \$2   | \$2   |     | \$5   |
|                      |      |      | 7,500 | 7,500 |     | 5,000 |
| Labor - Salaries     |      |      |       |       |     |       |
|                      |      |      | \$    | \$    |     | \$1   |
| Labor - Fringe       |      |      | 9,625 | 9,625 |     | 9,250 |
|                      |      |      |       |       |     |       |
| Travel:              |      |      | \$    | \$    |     | \$    |
| Air/Bus/Taxi/Mileage |      |      | 1,750 | 1,750 |     | 3,500 |
|                      |      |      |       |       |     |       |
| Travel: Lodging      |      |      | \$750 | \$750 |     | \$    |
|                      |      |      |       |       |     | 1,500 |
| Travel: Overnight    |      |      | \$250 | \$250 |     |       |
| Meals                |      |      |       |       |     | \$500 |
|                      |      |      | \$    | \$    |     |       |
| Outside Services     |      |      | 9,000 | 9,000 |     | \$1   |
|                      |      |      |       |       |     | 8,000 |
| Responsible Staff:   |      |      |       |       |     |       |
+----------------------+------+------+-------+-------+-----+-------+
| Total Cost of        |      |      | \$10  | \$10  |     | \$20  |
| Project              |      |      | 4,250 | 4,250 |     | 8,500 |
+----------------------+------+------+-------+-------+-----+-------+

Example #2

The two aspects of this plan include feasibility and business planning.
Following is a discussion of the process for each:

Feasibility Study: the feasibility study would include but not be
limited to:

1\. Economic feasibility: Information related to the project site;
availability of trained or

trainable labor; utilities; rail; air and road service to the site; and
the overall impact of the project.

2\. Market feasibility: Information on the sales organization and
management, nature and extent of market to market area, marketing plans
for sale of projected output extent of competition and commitments from
customers or brokers.

3\. Technical Feasibility: this aspect shall identify and estimate
project operating and

,development costs and specify the level of accuracy of these estimates
in the assumptions on which these estimates have been based.

4\. Financial feasibility: develop an opinion on the reliability of the
financial projections and

the ability of the business to achieve the projected income and cash
flow. An assessment of the cost accounting system, availability of
short-term credit for seasonal business, and adequacy of raw materials
and supplies.

5\. Management feasibility: Evidence that continuity and adequacy of
management has been evaluated and documented as being satisfactory.

Business Plan: the business plan shall include the following: Executive
Summary:

i\. Business Concept

ii\. Company

iii\. Market Potential

iv\. Management Team

v\. Distinct Competencies

vi\. Required Funding and its Use

vii\. Exit strategy

Company Description: includes mission statement, summary of activity to
date, current stage of development, competencies, product or service,
objectives, keys to success, location and facilities.

Industry Analysis: entry barriers, supply and distribution,
technological factors, seasonality, economic influence, regulatory
issues.

Market Analysis: definition of overall market, market size and growth,
market trends, market segments, targeted segments, customer
characteristics, customer needs, purchasing decision process, product
positioning.

Competition: profiles of primary competitors, competitors products and
services and market share, competitive evaluation of product, future
competitors.

Marketing and Sales: products offered, pricing, distribution, promotion
including advertising and publicity, trade shows, partnerships,
discounts and incentives, Sales force and sales forecasts.

Operations: product development including development team, development
costs, and development risks. Manufacturing including production
processes, production to, quality assurance, administration, key
suppliers, product/service delivery, customer service and support, human
resource plan, facilities.

Management and organization: management team, Board of Directors, key
personnel,

organizational chart.

Capitalization and Structure: legal structure of company, present equity
positions, deal structure, exit strategy.

Development and Milestones: time may be specified on a relative scale
rather than specific calendar dates. Milestones may include some or all
of the following: financing commitments, product development milestones,
signing of significant contracts, achievement of break even performance,
expansion, additional funding, any other significant milestones.

Risks and Contingencies: some common risks include: increased
competition, loss of a key employee, supplier\'s failure to meet
deadlines, regulatory changes, changing business conditions.

Financial Projections: assumptions, financial statements including
balance sheet income statement,

cash flow, breakeven analysis, key ratio projections, financial
resources, financial strategy.

Summary and Conclusions:

+-----------------------+------+-------+-------+------+-------+-------+
|                       | S    | End   | B     |      |       |       |
|                       | tart |       | udget |      |       |       |
+-----------------------+------+-------+-------+------+-------+-------+
| Task                  | Date | Date  | Fe    | Cash | In    | Total |
|                       |      |       | deral |      | -Kind |       |
+-----------------------+------+-------+-------+------+-------+-------+
| Task 1 Economic &     | 10-  | 12-   | \$    | \$2  |       | \$    |
| Market                | 1-06 | 31-06 | 2,500 | ,500 |       | 5,000 |
|                       |      |       |       |      |       |       |
| Feasibility           |      |       |       |      |       |       |
|                       |      |       |       |      |       |       |
| Responsible Staff:    |      |       |       |      |       |       |
+-----------------------+------+-------+-------+------+-------+-------+
| Task 2 Technical &    | 10-  | 12-   | \$    | \$2  |       | \$    |
| Financial             | 1-06 | 31-06 | 2,500 | ,500 |       | 5,000 |
|                       |      |       |       |      |       |       |
| Responsible Staff:    |      |       |       |      |       |       |
+-----------------------+------+-------+-------+------+-------+-------+
| Task 3 Management     | 1-   | 3-    | \$    |      | \$    | \$    |
|                       | 1-07 | 31-07 | 2,500 |      | 2,500 | 5,000 |
| Responsible Staff:    |      |       |       |      |       |       |
+-----------------------+------+-------+-------+------+-------+-------+
| Task 4 Develop        | 1-   | 3-    | \$    |      | \$    | \$    |
| Business Plan         | 1-07 | 31-07 | 2,500 |      | 2,500 | 5,000 |
|                       |      |       |       |      |       |       |
| Responsible Staff:    |      |       |       |      |       |       |
+-----------------------+------+-------+-------+------+-------+-------+
| Total Cost of Project |      |       | \$1   | \$5  | \$    | \$2   |
|                       |      |       | 0,000 | ,000 | 5,000 | 0,000 |
+-----------------------+------+-------+-------+------+-------+-------+

Example #3

Overall Project:

The feasibility analysis will be focused on determining the viability of
a producer-owned wind energy development. Ranch has a known wind
resource whose value needs to be effectively quantified to determine its
economic value. The project will be heavily supported by the State
Energy Office through their Anemometer Loan Program, the University
Electric Motor Training and Testing Center, and by the Area New
Development Organization, who has received Department of Energy funding
to promote wind energy throughout \*. The overall project is comprised
of four principal steps listed in the table below.

Amount of Request

Example #1

Cheese Company is requesting \$104,250 and will match \$104,250.

Example #2

Amount requested \$10,000

Project cost per owner-producer

Example #1

The project cost per owner-producer is \$5,212.50.

Example #2

Project cost per owner-producer One owner - producer = \$10,000.

Example #3

\* and \* are producers and are the principal managers and owners of
this value-added venture. The total project grant request is \$. Based
on that, the average grant per producer in this project is \$. This
amount is well below the \$75,000 limit required to receive full points
for this section.

Business Management Capabilities

Applicants must discuss their financial management system, procurement
procedures, personnel policies, property management system and travel
procedures. Up to two points can be awarded for each component of this
criterion, based on the appropriateness of the system, procedures or
policies to the size and structure of the business applying. Larger,
more complex businesses will be expected to have more complex systems,
procedures, and policies than smaller, less complex businesses.

> Financial Management System: This business, being a sole
> proprietorship, uses the services of a CPA to maintain and prepare our
> financial data for tax purposes. On a daily basis, we maintain our
> records using Quickbooks, Microsoft Excel, etc. Receipts of all
> expenditures are recorded in these spreadsheets. Bills are paid using
> a farm checking account.
>
> Procurement Procedures: As the need arises, I will check with various
> retailers concerning parts, supplies, services or other items that are
> needed on the farm or in the processing of my commodities. While I do
> not believe that the cheapest price is always the best, I do recognize
> when I should accept an offer or check with other sources. Being a
> farmer for \* years has allowed me to become very knowledgeable about
> the market for services and supplies and I feel that I am able to
> negotiate a fair price for the product I need.\
> \
> Personnel Policies: As this is a small farm operation with limited
> need for outside employees, a written set of personnel policies has
> not been established. At the present, only family members are
> employed. At such time as expansion occurs and the need for outside
> employees becomes evident, we will first look to those people in the
> area who are knowledgeable about our operation and have the ability to
> perform the work needed at that time. We will abide by all state and
> federal labor laws when employing these new workers.\
> \
> Property Management System: We maintain our property and processing
> facility in accordance with all local, state and federal requirements.
> We are properly zoned according to the local ordinances to operate our
> facility at this site. We maintain the physical property to the best
> of our abilities in order to present a pleasing atmosphere for our
> customers. We have a management plan for our farm on record with the
> NRCS and FSA office. Real Estate taxes are paid annually. Insurance,
> both property and liability, is maintained on the farm, buildings and
> processing facility.\
> \
> Travel Procedures: When travel is required, as it relates to the
> value-added operation, the uses of a local travel agent are used. This
> ensures that we will get the accommodations that we need in order to
> complete our business. Of course, the internet is also available for
> us to use for flights and hotels. The use of various travel web sites
> will also allow me to make travel arrangements, including flights and
> hotels, at the most reasonable cost to me.

Sustainability and Economic Impact

Projects will be evaluated based on the expected sustainability of the
Venture and the expected economic impact on the local economy. Points
will be awarded as follows:

0-4 points will be awarded if the applicant does not substantively
address the criterion.

5-9 points will be awarded if the applicant demonstrates that he Project
has a reasonable chance of success OR will have a small impact on the
local economy.

10-14 points will be awarded if the applicant demonstrates that he
Project has a reasonable chance of success and will have a small impact
on the local economy.

15 points will be awarded if the applicant demonstrates that he Project
has a reasonable chance of success and will have a significant impact on
the local economy.

Business size

2005 gross sales: \$3,000,000

Administrator points

Innovative technologies- The fan separator system is an emerging
technology that mechanically separates and processes solids and semi
solid materials. This design is currently being adapted for dairy
operations in the Midwest. Currently there are no similar systems known
within a 500 mile radius. The system is unique in that it greatly
reduces the time necessary to transform raw animal waste into a
high-quality value-added product.

Under-served Area -- This area of the state is suffering based upon the
significant loss of manufacturing jobs over the past few years and our
agricultural based economy. Our success in obtaining financial
assistance in terms of loans and grants from USDA has been limited.

CERTIFICATION OF MATCHING FUNDS

Applicants must provide a budget to support the work plan showing all
sources and uses of funds during the project period. Applicants will be
required to verify matching funds, both cash and in-kind. Sufficient
information should be included such that USDA can verify all
representations. *If matching funds are in cash, applicants must provide
a copy of a bank statement showing a funds level adequate to cover the
stated cash match. If a third party is providing cash for the match, the
applicant must submit a letter from that party certifying that the party
has the cash and will provide that cash to the applicant. If goods
and/or services are donated, the application must include a signed
letter from the party donating the services indicating a description of
the goods/services, the value of the goods/services, and when the
goods/services will be provided. Matching funds may not be spent or
donated prior to the start of the grant period. Applications submitted
without sufficient verification of all matching funds will be considered
incomplete.*

\[CLICK AND INSERT NAME OF APPLICANT\]certifies that matching funds will
be available at the same time grant funds are anticipated to be spent
and that matching funds will be spent in advance of grant funding, such
that for every dollar of grant funds advanced, not less than an equal
amount of matching funds will have been expended prior to submitting the
request for reimbursement.

APPENDIX A: VERIFICATION OF MATCHING FUNDS

Insert all documents verifying matching funds after this page. Documents
include, but are not limited to, signed letters from third parties and
bank statements. For a complete discussion of the requirements for this
section, please see the NOSA.

APPENDIX B: LETTERS OF SUPPORT

Letters of support can be furnished in this section but they do count
against your 35 page limit.