Jun 14, 2012
Grants give farms kick-start to expand with value-added products

USDA has awarded $40.2 million in value-added producer grants to 298 recipients in 44 states and Puerto Rico for 2012.

According to USDA, the grant program is a tool for independent fruit and vegetable producers, among others in the farming industry, to enhance their ability to meet consumer demand and move their products into the marketplace.

“These projects will provide financial returns and help create jobs for agricultural producers, businesses and families across the country,” said Kathleen Merrigan, USDA’s deputy secretary. “This funding will promote small business expansion and entrepreneurship opportunities by providing local businesses with access to capital, technical assistance and new markets for products and services.”

Program guidelines hold that grants can be made in amounts up to $300,000 for working capital and $100,000 for planning. Applicants must be able to match the USDA grant dollar for dollar.

“This isn’t just a handout,” said Mike Daniels, a loan specialist with the business and cooperative programs section of USDA Rural Development in Wisconsin. “They have skin in the game. It’s a dollar for dollar match.

“It takes their idea and they’re putting in their labor, their time, their money and the government has given them an opportunity to take the hog he would have sold to market and convert it into smoked bacon and hams and stuff and sell them at a premium price.”

While the funds can’t be used to purchase equipment or other physical assets, they can pay for feasibility studies, business plans, marketing and farm-based renewable energy projects, according to USDA.

“We had one gentleman who talked about how he’s gotten to capacity because of a grant that was awarded last year,” said Daniels. “He’s been able to put on a couple or three new employees. His business has grown.

“He is very pleased with how this grant has helped him out, getting his feet on the ground and getting things going forward.”

Grants help

At Six Rivers Cooperative in northwestern Wisconsin, vice president and manager Maurice Smith said a $149,700 grant the group received in 2010 helped increase market share by providing operating capital. Established in 2008, Six Rivers is owned by about 20 farmers across the region, who sell their own products as well as some purchased from other farmers.

“We sell to somewhere between 60 and 65 restaurants and to three or four (food) co-ps,” Smith said. “Our members are also selling other places, too. Some are Amish folks and they only sell through us.”

The USDA grant helped the cooperative to pay its member-farmers on a more timely basis, purchase inventory and cover labor for packaging and sales.

“The bad thing about the grant is you can’t use the grant money for equipment, which is a real handicap because you can’t go out and increase your market and sell more product if you don’t have the equipment to do it with,” Smith said. “It’s kind of a chicken and egg thing. You already have to have your facilities in place before you can do the marketing and delivering.”

For example, Smith said it would have been great to be able to purchase a truck with grant money. He handles all of the deliveries, purchasing product from members at a price that reflects what the product is worth, along with his expenses for maintenance, fuel, utilities for coolers, labor for packing the boxes, “all of the stuff that goes with having a delivery service – insurance and the whole ball of wax,” he said.

Smith and his wife, Gail, run Dragsmith Farms in Barron, Wis., where they grow organic crops. It’s there that Smith runs the co-op out of a 3,000-square-foot building.

“We were already doing all this before we started the co-op,” he said. “We’ve had to increase our capacity.”

Denise Kilgus, co-owner, with other family members, of Living Water Farms in Strawn, Ill., said receiving a $300,000 USDA grant this year is “huge” and couldn’t be better timed for her family’s 4-year-old company.

“It is very pivotal for us,” she said.

A year-round, sustainable hydroponic growing operation, Living Waters devotes about 8,000 square feet to production of vegetables that range from microgreens to lettuces and other specialty items.

“Some are actually mixed and clammed, others are sent out as a living tray,” she said.

While Living Water Farms has some wholesale customers, their target market is upscale restaurants in nearby St. Louis, Springfield and Chicago. The company just added two more greenhouses to increase capacity, and Kilgus said funds from the grant would help with marketing to support their growing production capabilities.

“That includes coming up with better-designed bags and boxes and expanding online and social media presences.
“We’re going to be better able to display our product,” she said. “When a chef sees our box, it helps them know who we are and what we grow for them.

“A lot of it’s going into marketing, and into our website. We need to get into Facebook and get our name out there better.”

When Peppadew Fresh Farms in Morganville, N.J., was awarded a $259,000 value-added producer grant from USDA, even the state’s director of agriculture came out for a ceremony that included other local and state dignitaries. It was the largest value-added producer grant issued in New Jersey to date, and will help the farm launch a U.S.-grown line of processed gold peppadew peppers, said Peppadew Fresh President Pierre Crawley.

Current processed peppadew products in the United States come from South Africa, said Crawley, where the pepper was only discovered about 16 years ago. Crawley said he started selling processed peppadews from South Africa about 10 years ago.

“We have a relationship with them where they’re willing to give us the seeds to grow the product here,” he said.

An earlier $70,000 USDA grant helped fund the feasibility study that led the New Jersey grower to be poised to begin production.

“We were growing the gold (peppadews), but the processing is what’s coming from South Africa,” Crawley said. “What this grant is now going to do is enable us to bring the key part of what this is all about, here.”

The grant will be used as working capital to market the new processed Peppadew Goldew. Crawley said they’ve been collaborating with the Food Innovation Center at Rutgers University, a business incubation and economic development accelerator program. The peppers will be processed at Rutgers and bear the state’s Jersey Fresh label.

“It will not only be marketed locally, but it will have the appeal of being locally grown for our customers in the metro New York/New Jersey area,” Crawley said.

Peppadew Fresh Farm is currently growing about 6 acres of the gold peppers, with an eye on expanding production with other nearby farmers.

“The idea would be to grow and process the product again in the smallish number of acres we have, and then expand this to other farmers, to give them what you would call a higher value crop to grow,” he said.

Crawley also grows perennial flowers and wine grapes, and the company just got licensed as a winery. Cooking classes are also offered, and expect the farm to grow as a destination for agritourism, he said.

“Where most industries leave the United States – definitely on the agricultural side – and go overseas, what we’re trying to do is bring this product here,” Crawley said. “It’s kind of a shining star for our local community because there is only one peppadew and it is being grown in Marlboro, New Jersey.”

To view a video from the Peppadew Fresh Farms’ grant awards ceremony, click here.

—By Kathy Gibbons, Editorial Director

Photos: Home Page by Six Rivers Cooperative; Living Water Farms; Peppadews & bottom right provided by Peppadew Fresh Farm.


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