The Visible and Not-So-Visible Impacts of Value-Added Programs

Rodney B. Holcomb

Food & Agricultural Products CenterOklahoma State University

How Did We Get Here?

Earlier state programs served as a template for other states as well as USDA– Agricultural Products Utilization Commission (APUC)

ND in 1979 with an emphasis on, of all things, ETHANOL!

Grant funding for research, prototype development, marketing, and farm diversification

– Agricultural Utilization Research Initiative (AURI) MN in 1987 as a non-profit entity Mix of funding and technical/business support

The New Millennium and the “Grassley Fund”– $25 million for Ag Marketing Resource Center

(AgMRC)– $40 million for what became known as the Value-

Added Producer Grant (VAPG) program

More Value-Added Programs Agricultural Innovation Center grants (AIC)

– 2002 Farm Bill Rural Business Enterprise Grants (RBEG)

– RD entities apply, benefit for-profit operations Rural Business Opportunity Grants (RBOG)

– Training & tech. assistance, studies, incubators Rural Cooperative Development Grants (RCDG) USDA Business & Industry Guaranteed Loans

(B&IGUAR) Other programs and special initiatives Several state programs have leveraged their

funding via one or more of these USDA programs

Measuring What Can Be Seen – Jobs and Income Woods & Hoagland (JFDR, March 2000)Woods & Hoagland (JFDR, March 2000)

– Client reports/evaluationsClient reports/evaluations– Job and wealth creationJob and wealth creation

Hodur, Leistritz, and Hertsgaard Hodur, Leistritz, and Hertsgaard (NDSU, November 2006)(NDSU, November 2006)– APUC’s mission is to “create new wealth APUC’s mission is to “create new wealth

and jobs…”and jobs…” Chiappe & Nelson (SWOSU, December Chiappe & Nelson (SWOSU, December

2003)2003)– OK AEDP’s goal is to “encourage the

creation of jobs and industry within the agricultural economy”

OK Ag Enhancement & Diversification Program As an example, looking at impacts over

first three years of operation Direct, indirect, induced employment

impact = 604 jobs Output impacts = $25.8 million DPI impacts = $8.4 million State income tax = $0.3 million Population impact = 200 people

retained

Who Deserves the Biggest Pat on the Back? Value-added efforts generally supported

by a variety of programs/efforts– Monetary support (local, state, federal)– Technical assistance, in-kind support

Impact assessments generally don’t distinguish – and often can’t– Ex: VAPG requires a match from non-federal

funds State program dollars, in-kind services

– Ex: State programs leveraging funds with RBEG

How can individual impacts be distinguished?

OSU Food & Ag Products Center 10-Year Impacts Technical/business support, not financial Start with basic economic impact of

those assisted by FAPC (2006)– Direct: 8,700 full-time jobs, 325 part-time

jobs, and $1.9 billion in sales– Total: 52,000 jobs and $6.3 billion in

economic activity Then ask for FAPC-specific impacts

– Direct: 157 jobs and $93 million in sales– Total: 800 jobs and $308 million in

economic activity

Appreciating What Often Can’t Be Seen/Measured Preventing financial failures Relationships, networks, and synergies

– The rise of local “champions”– Government entities actually working

together (local, county, state, federal)– Network development within an industry

Picture-worthy moments– Strange bedfellows– Once-in-a-lifetime working agreements

Examples from Oklahoma: VAP Co-op $19 million frozen dough plant in Alva,

OK– Over 900 member-owners– OK’s first VAPG recipient, B&IGUAR

Three local banks and their presidents working together– Every planning meeting, equity drive meeting– Three vastly different personalities– Collectively negotiated bridge funding when

B&IGUAR was delayed– Never happened before, probably never again

Another Example: PGI

Plains Grains Incorporated (PGI)– Non-profit HRW wheat marketing center– Support from OK, KS, TX, CO, NE, SD, WY and

MT wheat commissions– Creates annual quality reports for U.S. Wheat

Original board consisted of OK’s largest private and co-op elevator reps– Extremely fierce competitors– Collectively created the concept of

“grainsheds”– Work together to make trade shipments happen

Public Perceptions and Common Misconceptions Generally positive perceptions –

assuming people know about them– Concepts are publicly appealing– Programs aren’t marketed well

Can’t cash the “big check”– Reimbursement method for VAPG– Payouts in installments, reports required

for state programs Don’t understand costs of “free”

money– Time and expense of application, waiting

Why Good Projects Don’t Apply - General Funding needs don’t match the

program– No plant, property, and equipment

Match requirements– Acquisition and documentation

Eligibility– Organization structure/control– Location (for certain rural-based programs)

“I’m not a grant writer.”– Nor a grant administrator

Why Programs Are (and Will Be) Supported Biofuels projects

– Ex: APUC still assisting ethanol/biofuels– New technologies, feedstock options

Chasing the latest food trend– Natural/organic– Otherwise green/sustainable ag

products– Demands of “locavores”

Producers always excited by the notion of vertical integration