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 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 MicroLoan 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