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According to the Rural Business Cooperative Service, this year’s Notice of Solicitation for Applications (NOSA) only garnered between 400 and 450 Value-Added Project Grant applications in comparison to last year’s 781 applications.  This is roughly a 50 percent reduction in the number of applicants.  In FY03, 184 projects were funded for a total of $28.7 million, whereas USDA will only be able to fund $13 million in grants for FY04.  Final applications have been received and the review process begun for FY04. USDA will announce the awardees of the VAPG program in early October.  

Maintaining mandatory funding levels for this program has been problematic.  Last year the President’s budget request proposed eliminating the farm bill allocation for the program, and recommended a mere $2 million in discretionary funding.  The FY04 Appropriations bill eliminated all $40 million of mandatory funding and then restored it to $15 million in discretionary dollars, a 61 percent cut in funding.   

Originally authorized in the 2000 crop insurance bill and first championed by Senator Chuck Grassley (R-IA), the Value-Added Producer Grants program was reauthorized and modified in the 2002 farm bill and slated to receive $40 million annually. The purpose of the grants is to facilitate greater participation in emerging markets for value-added products.  The awarded monies can fund either planning activities to design an effective value-added marketing opportunity or be used to acquire capital to run an established value-added business.  The grantee will be expected to provide proof of the availability of matching funds that must be equal to or greater than the awarded grant.  The maximum award per grant is $500,000 with no minimum grant requirement.  USDA predicts it will award approximately 78 grants with an average award of $170,000.  Only projects that have a budget period length of 12 months are being considered.  

At a time when this country is facing oil prices of over $45 a barrel and serious issues surrounding energy security, full federal support of alternatives to petroleum products is essential.  The VAPG program not only provides much needed investment in the U.S. ’s agricultural sector, but is paving the way for the development of a more robust bio-based product industry as well as further incentivizing production of bioenergy (ethanol and biodiesel) from a wide variety of feedstocks.  The yearly fluctuations in available grant monies have been onerous for potential applicants, resulting in this year’s significantly reduced level of interest.  Senate action on agriculture appropriations is still pending for FY05, while the House has approved $15.5 million for this program.

In related 2002 Farm Bill news, USDA’s Commodity Credit Corporation has opened its 30-day application period, until August 31, 2004, for their Bioenergy Program, authorized by Section 9010 of the 2002 Farm Bill.  The CCC has up to $150 million to award in payments to reimburse ethanol and biodiesel producers for the purchase of commodities to expand their existing production during FY 2005 (October 1, 2004 - September 30, 2005).  Biodiesel producers are also eligible for program payments for up to 15 percent of their base load production, regardless of production increases during FY 2005.  This program is scheduled to end through FY 2006.   

To be eligible under this program, ethanol producers must be selling their ethanol commercially (authorized to be unfit for consumption by the Bureau of Alcohol, Tobacco, Firearms and Explosives), whereas biodiesel producers must be selling their product commercially and be in good standing with the Environmental Protection Agency.  

This program has helped expand ethanol production by 607 million gallons and biodiesel production by 18.5 million gallons in FY 2003.  During the first two quarters of FY 2004 an increase in production of ethanol by 280.9 million gallons and biodiesel by 6.9 million gallons has been achieved.  

According to USDA’s August press release eligible commodities are barley; corn; grain sorghum; oats; rice; wheat; soybeans; cotton seed; sunflower seed; canola; crambe; rapeseed; safflower; sesame seed; flaxseed; mustard seed; cellulosic crops, such as switchgrass and hybrid poplars; fats, oils, and greases (including recycled fats, oils and greases) derived from an agricultural product; and any animal byproduct (in addition to oils, fats and greases).