Written by John Wiegand
West Michigan-based agribusinesses and food and beverage companies will soon have a new source of capital to fund expansion projects.
As of Oct. 1, the Michigan Department of Agriculture and Rural Development (MDARD) will begin to deploy $4.7 million for its Food and Agriculture Investment Program, which it operated as a pilot project in the current fiscal year.
Officials believe the program will become a mainstay in Michigan’s economic development toolbox because it helps fill funding gaps for agribusiness expansion projects that do not meet the requirements for traditional performance-based grants from the Michigan Economic Development Corp. (MEDC).
“I found during my time here that the MEDC has a lot of pressure on the funds they have available,” said MDARD Director Jamie Clover-Adams. “Many times, projects in the food and ag space don’t provide as many jobs, but for us, they’re important because of their impact on the whole supply chain. They provide benefits for farmers and people providing feed and truckers. We look at the whole supply chain.”
For projects to qualify for performance-based grants under the MEDC, companies must create more than 25 or 50 jobs, depending on if the company is located in a rural or urban environment. But even with large expansion projects, agribusinesses typically do not generate the required volume of jobs, sources said.
Additionally, the MEDC incentives must go to retain companies in the state, which isn’t normally a concern for agribusinesses.
Beyond supporting existing companies in the state, Clover-Adams hopes to use the funding to attract new, innovative agribusinesses to Michigan.
“You look at our agriculture and how diverse we are, but we rank 18th in the country in food processing,” Clover-Adams said. “We should be much higher than that, and I look at this as an opportunity to bring more of those companies to Michigan.”
The program marks the first time the state has offered a business development incentive targeted specifically at agribusinesses, said Peter Anastor, director of MDARD’s agricultural development division.
MDARD historically has offered a “value-add” grant program aimed at supporting startup agribusinesses. That grant program now will draw from the same pool of funds as the Food and Agriculture Investment Program.
The decision by Gov. Rick Snyder and the state Legislature to fund the program through the next fiscal year serves as a positive sign for the agriculture industry.
“I think it’s a huge win,” said Jim Byrum, president of the Michigan Agri-Business Association. “It’s a recognition that agriculture is a little bit different than some of the other traditional manufacturing economic development activities that the MEDC engages in. It’s a positive for the agricultural industry.”
GROWING THE SUPPLY CHAIN
According to Byrum, incentives for agribusinesses have sweeping effects along the supply chain compared to other industries, even if they may not yield a large number of jobs.
“A processing plant that might handle corn, soybeans or wheat might not employ a lot of people, but the economic reverberation through the community can be tremendous,” Byrum said. “It can help increase the prices farmers receive, helping with transportation infrastructure (and) demands for transportation. The multiplier through the community tends to be pretty dramatic. Also, most of those activities are rural in nature. We spend a lot of time talking about rural economic development and this program will help foster that.”
MDARD awarded Saranac-based Herbruck’s Poultry Farm Inc. $100,000 under the pilot phase of its Food and Agriculture Investment Program this year to support the company’s new facility in Ionia.
“The creation of the Food and Agriculture Investment Program is an important recognition that agriculture is a unique sector when it comes to economic development — whether it’s the need for modern rural roads and highways, enhanced rural energy availability or access to other key public utilities,” Executive Vice President Herb Herbruck said in statement provided to MiBiz. “By working together with the agribusiness community through this new program, MDARD is providing an important complement to existing economic development tools.”
In addition to Herbruck’s, the state agency also awarded $225,000 to Coopersville-based Continental Dairy LLC and Fairlife LLC under the pilot phase of the program. Taylor-based Great Lakes HPP LLC received $150,000.
Sources interviewed for this report emphasized that MDARD is working in partnership with the MEDC to debut the new incentives.
“We’re not looking to go off on our own and do things in a separate manner from what the MEDC is trying to do,” Anastor said, noting one of the MEDC’s key focus areas is on agriculture. “On economic development projects, we’re going to work pretty hand-in-hand with them. I think where this gives us an advantage is that it gives us as a state, MDARD and the MEDC a new way to help companies that maybe don’t fit the MEDC’s requirements.”
Despite the planned collaboration on projects, MDARD has full autonomy and is not obligated to work with the MEDC on projects that receive the new grants, sources said.
FOCUSING ON KEY SECTORS
Although the business development incentives available under the Food and Agriculture Investment Program are open to all subsectors of the agriculture industry, MDARD will focus its efforts on several key groups.
Specifically, the agency is targeting companies in the dairy, savory snacks, baking and craft brewing sectors.
A report from Euromonitor International commissioned by the MEDC notes the dairy sector is Michigan’s largest agricultural sector and has a growth rate comparable to other fast-growing markets. The nearly $65 billion U.S. dairy industry is expected to grow approximately 2.8 percent annually through 2020, according to the report.
“In Michigan spirits, beer, savory snacks and dairy have had the largest historical gains,” according to the report. “The growth of these industries is anticipated to continue in the forecast, which shows a healthy and growing consumer market for these industries across the state.”
For Clover-Adams, the new grant program marks an important step forward to promote Michigan as a hub for agribusinesses.
“We’re just really excited about the growth opportunities that we have and we’re looking forward to working with companies and growing the sector,” she said.
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