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

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1997

2000

Trends in Food Spending (Current Dollars)

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$100

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$700

1970

1972

1974

1976

1978

1980

1982

1984

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1990

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1998

2000

Billion dollars

Farmvalue

Total consumer expenditures

Trends in Food Spending (Real Dollars)

$0

$50

$100

$150

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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

Charles.green@vdacs.virginia.gov