USDA Rural Development Rural Business and Cooperative Service

1. Larry Carnahan USDA Rural Development (620) 784-5431 larry.carnahan@ks.usda.gov September 2003 USDA Rural DevelopmentRural Business and Cooperative Service “Partners in helping the people of rural America develop sustainable communities”

2. Value-Added Agricultural Product Market Development Grants

3. The Farm Security and Rural Investment Act of 2002 Farm Bill Highlights • $40 million per year for 6 years • Maximum Grant Amount $500,000 (priority points will be given for applications under the $500,000 max) • Applicants must provide matching non-Federal funds at least equal to the grant. • Expanded eligibility The Farm Security and Rural Investment Act of 2002

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

5. 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

6. Value-AddedAgricultural ProductMarket Development Grant Applications (FY 2002) 19 21 22 10 32 67 33 19 15 16 33 71 Nationally 714 Applications for $121 Million dollars

7. Value-Added Agricultural Product Market Development Grant Selections (FY 2002) 13 1 5 6 9 4 5 3 20 9 20 2 14 1 4 5 29 13 7 2 0 0 3 1 8 4 8 12 12 2 1 4 1 0 1 0 4 0 4 0 5 2 9 231 Applications Selected for $37.2 Million dollars

8. Kansas Projects Awarded Grants FY 2002 • Jewel County Sunflower Processing ($41,000) To assist with a feasibility study, business plan , and legal advise regarding a proposed sunflower processing plant. • Padonia Grain Farmers, Inc. ($50,750) To conduct a feasibility study and develop a business plan for segregating and marketing high protein corn. • American White Wheat Producers Assoc.($218,710) For a feasibility study and business plan development regarding the processing of heavy bran for use in breakfast cereals and specialty breads.

9. Kansas Projects Awarded Grants FY 2002 • Western Plains Energy, LLC ($291,615) For working capital to assist in the start up of a 30 mgy ethanol plant • East Kansas Agri-Energy LLC ($450,000) For working capital to assist in the start-up of a 20 mgy ethanol plant. • Cooperative Ag Services ($500,000) Working capital for the startup operation of a soy bean crushing facility.

10. 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

11. 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

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

13. Is Your Project Eligible? Three Levels of Eligibility 1) Is the applicant an eligible entity ? 2) Does your product meet one of the four categories of value-added activities ? 3) Are the funds being used for an eligible purpose ?

14. 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%)

15. 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.

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

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

23. 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

24. 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

25. 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

26. 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

27. Eligible Purposes Planning Activities to determine viability: • Feasibility Studies • Business and Marketing Plans • Legal Evaluations

28. Eligible Purposes Working Capital : • Legal and accounting costs • Salaries • Utilities • Inventories • Supplies • Office equipment • Other operating costs

29. 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

30. 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

31. 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

32. 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

33. 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

34. 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

35. 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

36. 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

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

38. Application ProcessAreas to Watch • Clearly state how you meet the definition of: - an eligible applicant - an eligible value-added activity - eligible use of grant and matching funds • Specify whether the application is for planning or working capital

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

40. ApplicationProcess • 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

41. 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

42. 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)

43. Scoring - Planning Purpose1. Nature of the Proposed Venture(maximum of 5 Points) Describe in detail the proposed venture • Explain what the venture is to accomplish • Describe the technology involved, is it proven • How will the customer base will be increased • How more profits will be available for producer-owners More points will be awarded to ventures with proven technology, that have a good chance of being viable and sustainable, and for the greatest expansion of markets and increased profits.

44. Scoring - Planning Purposes2. Qualifications of Those Doing the Studies(Maximum of 5 points) • Describe their credentials: education and experience in doing this type of study • the success rate of other ventures based on their studies • Include resumes Points will be awarded based on qualifications, demonstrated skills, and a successful track record

45. Scoring - Planning Purposes3. 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.

46. Scoring - Planning Purposes4. 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.

47. Scoring - Planning Purposes5. 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.

48. Scoring - Planning Purposes6. 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 • 2points for requests of $150,000 or less

49. Scoring - Planning Purposes7. 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

50. Scoring - Planning Purposes8. 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