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Value-added agriculture encompasses methods used to increase
the value obtained from agricultural production, such as manufacturing
processed food that sells at a higher price than raw commodities.
The term can also apply to nonfood items created from agricultural
commodities, such as processed wood or fuel.
USDA's Rural Business-Cooperative Service operates several
programs that have helped to finance development of rural
businesses, including value-added agriculture. These programs
include the Business and Industry Loan and Loan Guarantee
Program, which assists businesses of all types located in
rural areas, and the Value-Added Product Marketing Grant Program,
which focuses on assistance to value-added businesses and
cooperatives.
Summary of Provisions
Rules were liberalized to allow value-added cooperatives greater
participation in the Rural Business and Industry (B&I)
Program. Under the previous rules, B&I loan guarantees
were more limited in size of loan and location of the value-added
agriculture establishment, and individual farmers and ranchers
were not eligible for assistance. The new rules allow for
larger B&I loan guarantees (up to $40,000) for value-added
cooperatives located in rural areas and up to $25,000 for
those headquartered in metropolitan areas, provided they are
within 80 miles of the agricultural producers involved in
the operation.
Individual farmers and ranchers may now obtain B&I loans
and guarantees to buy stock in a value-added cooperative.
Intangible assets, such as trademarks, patents, and brand
names, may be considered when evaluating eligibility of agricultural
cooperatives for loan guarantees. Existing B&I loans to
cooperatives may be refinanced. In addition, B&I loans
and guarantees will be allowed for more types of renewable
energy systems, such as wind energy systems and anaerobic
digesters. Value-added agriculture businesses would also be
allowed to receive Rural Business Enterprise Grants.
A program providing training for farm workers in new technologies required for higher value crops is authorized for $10 million
per year for fiscal year (FY) 2002-07. Eligible organizations
include nonprofits or a consortium of nonprofits, agribusinesses,
State and local governments, agricultural labor organizations,
farmer or rancher cooperatives, and community-based organizations
with the capacity to train farmworkers.
A grant program assisting the Lower Mississippi Delta region is reauthorized at $7 million per year for FY 2002-07.
These funds would assist the development of state-of-the-art
technology in animal nutrition (including research and development
of the technology) and development of value-added manufacturing
to relieve severe economic conditions in the Delta.
Value-Added Agricultural Product Marketing Development
Grants, last funded as a pilot program in FY 2001, are
once again authorized, now at $40 million per year, with eligibility
liberalized to increase participation in the program. The
funding would come from Commodity Credit Corporation funds
for FY 2002-07. This program awards competitive grants to
independent producers or to agricultural producer groups,
farmer or rancher cooperatives, and majority-controlled producer-based
business ventures. The grants assist in developing business
plans and strategies that would create viable marketing opportunities
for value-added agricultural products.
The Agriculture Innovation Center Demonstration Program is authorized to provide technical assistance, business and
marketing planning, and organizational, outreach, and development
assistance to increase the viability, growth, and sustainability
of value-added agricultural businesses. USDA would make grants
to eligible entities to establish the centers, and USDA would
provide the centers with research and technical services.
From the funds authorized for the Value-Added Agricultural
Product Marketing Development Grant program, the demonstration
program will receive a minimum of $3 million in FY 2002 and
$6 million in each of FY 2003 and FY 2004. This demonstration
program is in addition to the already-existing Agricultural
Marketing Resource Center, which was funded previously.
Authorization is repealed for the Alternative Agricultural
Research and Commercialization Corporation, which has not
been funded in recent years.
Some Title IX provisions covering energy may also be viewed
as contributing to value-added agriculture.
Economic Implications
Proponents of value-added agriculture programs expect that
locating these activities in rural areas will result in rural
areas receiving a larger share of the jobs and income earned
in the process of converting raw farm products to consumer-ready
products. The Value-Added Agricultural Product Marketing Development
Grant Program supports these activities by providing planning
grants for developing business strategies and marketing strategies
to facilitate production and sale of the final products. This
support differs from the subsidies and direct and subsidized
loans provided for programs under other Titles. Direct Federal
support for these programs started only with the 1996 Farm
Act, so the programs have had little time to demonstrate the
viability and sustainability of value-added agriculture in
rural areas. Program experience with value-added agriculture
projects has been insufficient to determine if these planning
grants are sufficient support. Furthermore, rigorous economic
research on the viability of such investments is scant.
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