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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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