specialty agriculture in virginia a growth opportunity charles r. green, virginia department of...
TRANSCRIPT
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
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
1974 1978 1982 1987 1992 1997 2002
Est. market value of land & buildings per acre
Increasing Land Values in Virginia
Farmers Retain a Small Portion Consumers’ Food Expenditures
Farm value share of retail food price (%)
05
101520253035404550
1952
1955
1958
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
Trends in Food Spending (Current Dollars)
$0
$100
$200
$300
$400
$500
$600
$700
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
Billion dollars
Farmvalue
Total consumer expenditures
Trends in Food Spending (Real Dollars)
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
Billions
Deflated FarmValue
Total consumer 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 ServiceCharles R. Green
Project Manager, Specialty Agriculture804.786.3501