Adding Value to Rural America

By William Amt, NADO Research Foundation Program Manager, EDFS

Value-added production is an increasingly attractive way for farmers and others to meet challenges presented in fluctuations in the commodities market. Simply defined, value-added agriculture takes one product, such as corn and converts it into products of greater value. Corn farmers might continue to harvest it for straight consumption. But, they can add value by processing the corn to make canned cream corn; making ethanol from corn; and growing organic corn that is sold at a higher price than regular corn. Agricultural value can also be increased through tourism, online marketing and growing niche crops. The end result: increased income for producers and more job opportunities for farm areas.

The majority of value-added agriculture is undertaken by private corporations and producer-owned cooperatives. Co-ops are formed by farmers in a region who purchase equity shares in the co-op, with the number of shares correlating to the amount of raw material the farmer can contribute to the operation. Government, university and private programs support the establishment and management of co-ops’ production and distribution operations.

Government Supports Value-Added

Programs at the US Department of Agriculture that support value-added agriculture include Rural Business Enterprise Grant, Rural Business Opportunity Grant, Value-Added Agricultural Product Market Development Grant, and Business and Industry Guaranteed Loan Program. These can be used to cover costs for feasibility studies, business plans, working capital, infrastructure, technical assistance, cooperative stock purchases and plant construction.

According to the US Department of Agriculture’s Economic Research Service, state programs help with promotion and state labeling, business and technical assistance, loans and grants, resource directories, market research, job training and legal issues.

Adding Value in South Dakota

South Dakota’s Value-Added Agriculture Development Center was formed in 1999 by 19 producer-based commodity groups, trade organizations and cooperatives. It provides feasibility studies, business planning, market assessment and other services free of charge.

East River Electric Power Cooperative of Madison, South Dakota, and some of its member systems support farmers in northeast South Dakota with loans. According to Linda Salmonson, Public Affairs Coordinator for East River, the electric co-op recognized that local farmers “have a perennial shortage of cash. East River developed a loan program to offer producer cooperative members interest- free loans secured by their accrued but unpaid capital credit accounts.”

The program allows farmers to borrow up to $5,000 against future co-op patronage refunds, and the only requirement is that the money be invested in value-added agriculture projects—dairies, mills, slaughter operations, processing— owned and controlled by producer organizations. No interest is charged and funds are recovered in increments from future capital credit payments.

Regions Get Involved

In South Dakota, the Northeast Council of Governments helped Lake Area Hospital complete an expansion project with CDBG funds. CDBG funds have also been instrumental in promoting community involvement and participation by funding community centers and firehalls -- places where community groups typically meet.

In 1999, Region 8 Planning Development Council (PDC), in Petersburg, West Virginia, made a microloan to Gourmet Central, which is operated by Harvey Christie and located in a multi-tenant building constructed with an EDA economic adjustment grant. Terry Lively, Region 8’s Assistant Director, reported that Gourmet Central works with Highland Harvest, a nonprofit producer cooperative, to process and package value-added food products that are sold at Wal-Mart and specialty shops in West Virginia, Virginia, and Pennsylvania.

Northwest Pennsylvania Regional Planning and Development Commission in Oil City made an EDA loan in the 1980s to Pellegrino Foods to expand its product line from tomato sauce and canned peppers. Dale Massie, Northwest’s Associate Director, explained that this family-owned business has since grown to 40 employees and distributes its products, which now includes higher value products like strombolis, through Wal-Mart.

Debra Beavin, Executive Director of the Indiana 15 Regional Planning Commission in Ferdinand, reported that the commission is partnering with the Southern Indiana Rural Development Project to coordinate forums that will bring together tobacco farmers and economic development professionals to discuss alternatives to tobacco production, including value-added agriculture. “It’s highly unusual for farmers and economic developers to meet and talk about ways to diversify and grow the local economy,” Beavin said.

All three of these districts are EDA-funded.

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