# Presentation: 294955

## USDA Rural DevelopmentRural Business and Cooperative Service

-  **Larry Carnahan**
-  USDA Rural Development
-   (620) 784-5431
- _[larry.carnahan@ks.usda.gov](mailto:larry.carnahan@ks.usda.gov)_
-                September 2003

**“****Partners in helping the people of rural America develop sustainable communities”**

## Value-Added Agricultural Product Market Development  Grants

## The Farm Security and Rural Investment Act of 2002

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

- The Farm Security and Rural Investment Act of 2002

## 
      The primary objective:

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

**      ****The primary objective:**
- Is to help _eligible producers_ of agricultural commodities, agricultural producer groups, farmer and rancher cooperatives, and majority-owned producer-based business ventures _develop business_ _plans_ for viable marketing opportunities _and _develop _strategies to create marketing opportunities in emerging markets. _

##          What does this mean:

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

## Value-Added Agricultural Product Market Development Grant Applications (FY 2002)

**19**

**16**

**10**

**33**

**21**

**33**

**67**

**22 **

**15**

**19**

**32 **

**71**

**Nationally 714 Applications for $121 Million dollars**

## Value-Added Agricultural Product Market Development Grant Selections (FY 2002)

**6**

**8**

**2**

**13**

**9**

**12**

**29**

**9 **

**2**

**7**

**14 **

**12**

**231 Applications Selected for $37.2 Million dollars**

**1**

**13**

**5**

**8**

**5**

**5**

**3**

**4**

**0**

**0**

**1**

**5**

**4**

**4**

**4**

**4**

**4**

**1**

**0**

**0**

**0**

**1**

**2**

**3**

**1**

**0**

**20**

**20**

**9**

**2**

**1**

##     Kansas Projects Awarded                   Grants FY 2002

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

##    Kansas Projects Awarded                    Grants FY 2002

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

##   Kansas Projects Awarded         Grants FY 2002

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

##    Value-Added Producer Grants                      2003

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

## RBS/Coop Services VADG Website:

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

## Is Your Project Eligible?

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

**Three Levels of Eligibility**

## Is Your Project Eligible?

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

## Applicant Eligibility

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

## Applicant Eligibility

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

## Applicant Eligibility

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

## Applicant Eligibility

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

## What is an Emerging Market?

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

## Is Your Project Eligible?

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

## Product Eligibility

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

## Product Eligibility

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

## Product Eligibility

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

## Product Eligibility

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

##  Product Eligibility

**    ****A Value-Added Product Must:**** **
**Expand customer base for the product or commodity, and**
**Result in a greater portion of the revenues derived from the value-added activity that is available to the producer**

## Is Your Project Eligible?

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

## Eligible Purposes

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

## Eligible Purposes

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

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

## Feasibility Studies

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

##           Ineligible Purposes

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

## Application Process

- Complete applications, with all required forms and documentation, must be received no later than **October 20, 2003 at 4:00 p.m**.
- Late applications will not be accepted
- _Electronic submission is encouraged_,                 but must mail or fax the three signed     SF-424 forms

## Application Process

**Submit completed applications to:**
**    ****USDA Rural Development**
**    ****Larry Carnahan**
**    ****P.O. Box 437**
**    ****Altamont, KS 67330**
**    ****Fax: 1-620-784-5900**
**    ****Email: larry.carnahan@ks.usda.gov**

## Application Process  

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

## Application Process

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

## Application Forms and Proposal Format

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

##     For a Proposal Format Template

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

## Application ProcessAreas to Watch

**Clearly state how you meet the definition of:**
-         - an eligible applicant
-         - an eligible value-added activity
-         - eligible use of grant and matching funds
**Specify whether the application is for planning or working capital**

## Application ProcessAreas to Watch

** ****Verification of Matching Funds:**
- Clearly document the source and amounts of matching funds
- If in cash, furnish a copy of a bank statement or a copy of the
-     commitment from the funding source
- If in-kind match,  provide verification of all commitments and _how they are valued_
- Matching funds must be equal to or greater than grant funds
- Must be available and spent at the same rate as grant funds
- Other Federal grant funds cannot be used as matching funds

## Application Process

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

## Application Process

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

##  Scoring Criteria     Grants for Planning Purposes

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

**	**

**	**

**	**

**	**

**	**

**	**

##                              Scoring - Planning Purpose1. Nature of the Proposed Venture         (maximum of 5 Points)

- Describe in detail the proposed venture
- Explain what the venture is to accomplish
- Describe the technology involved, is it proven
- How will the customer base will be increased
- How more profits will be available for producer-owners
- More points will be awarded to ventures with proven technology,
- that have a good chance of  being viable and sustainable, and for
- the greatest expansion of markets and increased profits.

##  Scoring - Planning Purposes2. Qualifications of Those Doing the Studies (Maximum of 5 points)           

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

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

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

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

**Describe the level of producer commitment including:**
-  the number of producers involved or to be involved
-  cash contributions and level of production
**Describe the potential commitment of end-users including:**
-  possible markets identified and buyers contacted
**Describe other commitment including T/A, financial, and references:**
- Local/state development organizations and governmental entities
- commodity associations
- Institutions of higher education
- Higher producer, end-user, and  local support will result in more points.

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

- Discuss the tasks: when, who, how long, and cost
- Each task must be clearly defined and described in detail
- Present the order in which the tasks will be undertaken and the estimated time to complete
- Present a breakdown of estimated costs and allocate to each of the tasks
- The grant and matching funds must be allocated to each task
- Grant & match funds should be spent at the same rate on each task
-  Logical, realistic, and economically efficient plans and budgets will
-  result in higher scores.

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

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

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

- Divide the grant request by the total number of
- independent producers that are owners of the
- venture
- Points will be based on the largest number of
- producers / owners benefited for the least cost

##                    Scoring - Planning Purposes 8. Bio-mass Production

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

## Scoring Criteria Grants for Working Capital

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

## Scoring - Working  Capital1. Business Viability (Maximum of 5 points) 

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

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

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

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

**Describe the producer commitment  including:**
- the number of producers and their level of production
- financial resources invested and their use
- signed delivery agreements or letters of intent
**Describe who will purchase the output of the venture**
- the amount to be purchased
- completed marketing studies or markets that have been identified
- marketing agreements or letters of intent from the potential end-users
**Describe other commitment including T/A, financial, or references**
- Local/state development organizations and governmental entities
- commodity associations
**Points will be awarded based on the greatest level of documented commitment**

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

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

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

- Discuss the tasks: when, who, how long, and cost
- Each task must be clearly defined and described in detail
- Present the order in which the tasks will be undertaken and the estimated time to complete
- Present a breakdown of estimated costs and allocate to each of the tasks
- The grant and matching funds must be allocated to each task
- Grant & match funds should be spent at the same rate on each task
- Logical, realistic, and economically efficient plans
- and budgets will  result in higher scores.

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

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

## Scoring - Working Capital7.  Project cost per producer that is an owner (Maximum of 5 points)

- Divide the grant request by the total number of
- independent producers that are owners of the
- venture
- Points will be based on the largest number of
- producers/owners benefited for the least cost

## Scoring – Working Capital 8. Bio-mass Production 

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

## Scoring Areas to Watch

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

##             Scoring Areas to Watch

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

## Scoring Areas to Watch

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

## Scoring Areas to Watch

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

##             Scoring Areas to Watch

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

##          Scoring Areas to Watch

**Look at the scoring criteria for:**
- Amount of grant requested
- Cost per producer/owner
- You may want to reduce your requested grant
- amount slightly to add more score points
**Follow the NOFA and address all parts of each**** **
**scoring criteria very thoroughly**

## FOR MORE INFORMATION

-   **Larry Carnahan    620-784-5431**** **
** ****Email: **_[larry.carnahan@ks.usda.gov](mailto:larry.carnahan@ks.usda.gov)_
** ****Rural Development State Office    785-271-2730   **
**Website: **_**www.rurdev.usda.gov/ks **_
**Email: **_[2002farmbillRD@ks.usda.gov](mailto:2002farmbillRD@ks.usda.gov)_
**RBS/Coop Services VADG website:      **_[www.rurdev.usda.gov/rbs/coops/vadg.htm](http://www.rurdev.usda.gov/rbs/coops/vadg.htm)_
**Application template at: **_**www.agmanager.info**_
**                  ****David Coltrain  785-532-1523**
**                ****Email: **_[coltrain@agecon.ksu.edu](mailto:coltrain@agecon.ksu.edu)_
**                                                                        **