Grant program helps Washington County dairy farmer add value

By KARA KEETON, Special to KAN

Dudley Tapp's family has farmed in Washington County for generations, and he wanted his children to have the opportunity to one day return to the farm as he did. He knew, though, that to support the next generation, it was time to start looking at change on their small family dairy operation.

Tapp knew he wanted to continue milking cows, but with input costs continuing to rise and profit margins getting tighter, he didn't want to just grow the operation’s fluid milk production. That is when he and his family began looking at incorporating a value-added facility into their family farming operation.

While researching his idea, Tapp was told about the USDA Value Added Producer Grant (VAPG) program and decided to apply for a feasibility study.

The USDA VAPG is a federal grant created to provide assistance for planning activities and/or working capital for the marketing of value-added agricultural products and for the development of farm-based renewable energy. Independent producers, farmer and rancher cooperatives, agricultural producer groups, and majority-controlled producer-based business ventures are all eligible to apply for VAPG assistance.

Kentucky's USDA Rural Development office and the Kentucky Center for Agriculture and Rural Development (KCARD) are working together to help producers interested in exploring value added opportunities complete the VAPG application.

"Many of the producers and agribusinesses that we work with fit the qualifications for the VAPG," said Larry Snell, KCARD executive director. "We have had positive experiences working with VAPG applicants in the past, and we are excited to be working with the state Rural Development staff to identify applicants for the upcoming funding cycle."

Tapp was awarded a grant in 2007 and turned to Dr. Tim Woods at the UK College of Agriculture to do the study.

"The Tapps are a very interesting project and a great example of why producers should consider the USDA VAPG program," Woods said. "They are a small family dairy operation looking to shift into a processing business, so with the funding from their grant, we were able to thoroughly examine different product and processing options and to really look at what they would need to do from several angles such as management, financial, resource, production, and personnel."

Woods brought the Kentucky Center for Agriculture and Rural Development (KCARD) to the table at the beginning of the study to address the management and financial concerns associated with establishing a value-added dairy facility. 

"Management requirements for new ventures are often unappreciated," said Woods. "The KCARD management audit provided a candid assessment of what resources existed for the Tapps as well as what would be needed for each of the various scenarios they were considering."

For the marketing analysis, Woods used a new tool, the Kentucky Food Consumer Panel, to gauge the product and market potential for a variety of value-added dairy products, including bottled milk, artisan cheeses, and beer cheese. Several interesting options for a dairy-based agritourism venture also emerged in the research, including leveraging the Tapps’ location on the Kentucky Bourbon Trail.

The study confirmed that there is a strong demand in Kentucky for locally produced dairy products. It also showed that there were many viable strategies the Tapps could pursue with a value-added facility, ranging from trying to set up their own milk bottling and cheese operation to starting small, working with existing operations in the state.  

"The feasibility study and KCARD have given us ideas to get started on, even some things we hadn't considered," Tapp said. "The experience has helped us to open doors with the ultimate goal of having a facility on our own farm."

In the past, Kentucky projects that have received VAPG funds range from large-scale operations like Commonwealth Agri-Energy ethanol production facility in Christian County to family farmers like the Tapps.

Over the past few years Kentucky has been underrepresented in VAPG program, and that is why the Kentucky USDA Rural Development office and KCARD are collaborating to reach out to encourage potential applicants to apply. 

"Kentucky is in a unique position with the Kentucky Agricultural Development Fund to have an in-state program that could be a potential match of cost-share funds that applicants are required to have in order to receive VAPG grant funds," explained Snell. "We are here to help producers look at all aspects of the application process – even potential sources for the cost-share funds."

According to the VAPG guidelines, grant funds are to be used for planning purposes or working capital. Planning purposes include conducting feasibility studies or developing business plans to determine the viability of a potential value-added venture. Working capital grants are for normal operational expenses, such as purchasing inventory, office equipment or paying salaries, utilities or office space used in association with the proposed venture. However, grant funds cannot be used to purchase long-term assets. The maximum grant amount is $100,000 for planning and $300,000 for working capital requests.

"It is my understanding that there is going to be a simplified application process for applications of less than $50,000 which will be clarified when the new Notice of Solicitation of Applications (NOSA) is published for the VAPG program," said Dean Tandy, Kentucky Rural Development. "I would recommend that no matter what dollar amount is applied for that any potential applicant go ahead and start working on the application even before the new NOSA is published as the basics of the paperwork will not change too much."

For more information on the VAPG application, contact the USDA Rural Development Business Cooperative Division at (859) 224-7435 or by e-mail at dean.tandy@ky.usda.gov. For more information on KCARD's business development services, go to www.kcard.info.

Photo above: Joseph, Shirley and Dudley tap at their dairy operation in Washington County. (Photo by Kara Keeton)