Specialty Agriculture in Virginia A Growth Opportunity Charles

Specialty Agriculture in Virginia A Growth Opportunity Charles R. Green, Virginia Department of Agriculture & Consumer Service

Specialty Agriculture • Non- traditional agribusiness products, including commodity items not traditional to Virginia • Value-added agribusiness products or processes • Traditional agribusiness products which are marketed or distributed using new / innovative channels

Examples of Specialty Agriculture • • Extended season produce Identity preserved grains Organic products Bio-fuels Further processed food items Alternative forest products Agritourism / Agritainment

Specialty Agriculture The emphasis of specialty agriculture is adding value to a product or process

Why Specialty Agriculture? Why Add Value?

Importance of Specialty Agriculture • Potential for greater return on investment or greater return per acre than traditional commodity items • Allows agribusiness producers to take advantage of competitive advantages gained through diversification and / or differentiation • Greater long-term growth potential for specialty agriculture products than traditional commodity items

Status of Farming in VA Today • Smaller acreage farms, compared to national average • Increasing land prices per acre • Increasing production costs • Growing disconnect between value of farm production and retail food prices

Increasing Land Values in Virginia

Farmers Retain a Small Portion Consumers’ Food Expenditures

Creating Value vs Capturing Value • Capturing value is a function of altering the distribution of value in the agricultural production chain, or by cutting costs – vertical integration, cooperatives • Creating value is a function of altering the actual or perceived value to a customer – Unique or branded products, identity preserved or specialty products, bundling such as agri-tourism

Creating a Competitive Advantage: Ways of Adding Value • Producing and marketing real or perceived quality attributes • Reducing transaction costs • Bundling products • Owning assets along the supply chain for further processing

Remember that no competitive advantage is sustainable, indefinitely

Value Added Action • Discover and research a value added opportunity • Plan for a value added opportunity • Take value added action

Discovering and Researching a Value Added Opportunity • Does this enterprise offer good profit potential? • Is this enterprise adaptable to my area? • Do I have experience with this enterprise? • Do I have, or can I get, the resources to produce this product? • Am I willing and able to approach many different people for advise?

Discovering and Researching a Value Added Opportunity • Does market research and development appeal to me? • Am I willing to spend as much effort in marketing as in production? • Is this something I will enjoy? • Can I set realistic P&L goals for the enterprise? • Am I in the position to take a few risks to make more money?

Planning for a Specialty Ag. Venture & Creating a Business Plan • SWOT analysis • Choosing a strategic direction – Pursue growth – Sustain current business level – Retrench • Selecting direction objectives – – Market penetration Market development Product development Diversification • Set Marketing & Financial Objectives • Culminate into a business plan

Take Action • Use business plan to pursue financing and initiate the business

VDACS Integrated Approach to Supporting Specialty Agriculture Clearinghouse for financial resource information Marketing services Technical resource

Financial Resources • Business & Industrial (B&I) Guaranteed • Loan Program; USDA Guaranteed loans by commercial lenders to rural businesses. • Business & Industrial Direct Loan (B&I Direct) Program; USDA Direct Loans to Rural Businesses that do not qualify for bank financing in rural areas. • Direct Farm Ownership and Operating Loans; FSA Government Loans to Family Farmers and Ranchers for Farm Ownership and Operating Purposes U. S. citizens unable to obtain credit through commercial sources • Guaranteed Farm Ownership and Operating Loans; FSA Guaranteed Loan helps family farmers obtain commercial credit U. S. citizen unable to obtain credit elsewhere

Financial Resources • Intermediary Relending Loan Program (IRP); USDA Loans for establishing revolving loan funds to provide financing for rural businesses and community development • Rural Business Enterprise Grants (RBEG); USDA Grants for assisting small and emerging rural businesses to nonprofit and public bodies • Rural Business Opportunity Grants (RBOG); USDA Assist in the economic development of rural areas • Rural Cooperative Development Grant Program; USDA Grants for improving economic conditions of rural areas through development of new cooperatives

Financial Resources • Small Business Innovation Research Program (SBIR); USDA Grants for feasibility studies and product research and development to small businesses • 7(a) Loan Guaranty Program; SBA guarantees loans made to small businesses by lenders • 504 Certified Development Company Program (CDC); (SBA) Loans for building, improving, or purchase of a site or facility; and purchase of major equipment/machinery • SBA Micro. Loan Program; Very small loans and training primarily for business start-up • Small Business Investment Companies (SBICs); SBAVenture capital and business start-up capital typically for companies with high-growth potential

Financial Resources • Down Payment Farm Ownership Loan Program; FSA Assist beginning farmers and ranchers to purchase a farm or ranch • Loans for Socially Disadvantaged Persons; FSA Farm purchase and operating loans targeting socially disadvantaged groups • Rural Business Investment Program (RDIP); USDA and SBA Promotes economic growth and creates job opportunities in rural areas • New Markets Venture Capital Program (NMVC); SBA Promotes economic development in low income areas • Value Added Producer Grant Program; USDA Grants used for marketing value-added agricultural products

Financial Resources • Renewable Energy and Energy Efficiency Program (REEEP); USDA Assist in purchase of renewable energy systems & efficiency improvements • Virginia Business Assistance Loan Guarantee Program; VBA Deficiency guaranty up to $500, 000 • Virginia Capital Access Program; VBA Loss protection to participating banks • Small Business Environmental Compliance Assistance Loan Fund; VBA • VBA Economic Development Loan Fund; VBA Gap financing to small businesses • Southside Tobacco Region Capital Access Program; VBA Loan loss reserve fund for banks • USDA Cooperative Services Program; Helps rural residents start new cooperatives and improve the operations of existing cooperatives

Technical Resources • • • Regulations Product and industry standards Inspection Collaboration with cooperative extension Specialty ag. research grants

Marketing Resources • Virginia Grown program • Virginia’s Finest • VDACS Domestic & Int’l Marketing – Trade shows – Buyers’ tours – Retail promotions – Market Access Program

Contact Virginia Department of Agriculture & Consumer Service Charles R. Green Project Manager, Specialty Agriculture 804. 786. 3501 Charles. green@vdacs. virginia. gov