Value-Added Dairy


Welcome to our value-added dairy page! The University of Tennessee was awarded two USDA AMS grants: one focused on Tennessee dairy businesses and anther focused on the Southeast (TN, KY, and NC). As part of this grant, we are providing subwards to dairy businesses in TN starting December 15, 2020. In Spring of 2021, we will have an additional application available for dairy businesses in TN, KY, and NC. We will also be providing additional resources for those considering starting a value-added business or expanding an existing value-added business.

2020 Value-Added Dairy Workshop

Using Small Scale Dairy Equipment
Importance of Feasibility Studies for Dairy Businesses
Multistate Expert Panel Discussing Value-Added Dairy Grants
The Changing Face of Dairy Marketing
Lessons Learned from Dairy Producer-Processors

Subaward application period is currently open. Applications must arrive by mail or email no later than July 15, 2021.


Grant Information

The following conditions MUST be met to be eligible to apply for funding through the Dairy Business Innovation Initiatives program. Initiatives must meet the following three goals:

  • Diversify dairy product markets to reduce risk and develop higher value uses for dairy products;
  • Promote business development that diversifies farmer income through processing and marketing innovation; and
  • Encourage the use of regional milk production.

This subaward program (direct-to-business grants) is intended for existing or prospective dairy businesses. Dairy Businesses are those that that develop, produce, market, or distribute dairy products.

Subawards will only be made to prospective or current dairy businesses. Successful applications must focus on one or more of the following areas.

  • Modernization, specialization, and grazing transition on dairy farms
  • Value chain and commodity innovation and facility and process updates for dairy processors
  • Dairy product development, packaging, and marketing

Grant FAQ’s

Applicants must meet all of the following criteria: (1) operates or endeavors to operate a dairy farm or dairy plant in Tennessee, (2) has a project that meets the following goals: (2a) diversifies dairy product markets to reduce risk and develop higher value uses for dairy products, (2b) promotes business development that diversifies farmer income through processing and marketing innovation, (2c) encourages the use of regional milk production; and (3) has no immediate family members, i.e. parents, siblings, spouse, or children, working for the Tennessee Department of Agriculture or the Center for Profitable Agriculture, or serving on the subaward review committee.

Dairy businesses may apply for funding to modernize, specialize and/or to transition to grazing on their farms. This can include funding to improve or add value chain and commodity innovation and/or facility and process updates for dairy processors and to improve or add dairy product development, packaging and marketing. Some examples of how funds may be used include hiring an independent consultant to develop planning documents for the dairy business such as a feasibility study, business plan or marketing plan that will be useful in determining the likelihood of success or to develop a food safety plan. Funds may also be used to attend training to acquire skills needed to develop or market dairy products (for example, Western Kentucky University’s cheese-making short course or Ohio State’s Dairy 101: Introduction to Dairy Processing and Management short course. Funds for training may include registration fees, transportation (the lower of business class airfare or mileage at the IRS standard mileage rate) and lodging (at current rates in the continental United States “CONUS Rates”). Funds may be used to purchase dairy processing equipment such as pasteurizers, cheese presses and labelers. Funds may also be used to get product development help and services in recipe development, sensory evaluation, packaging considerations or shelf-life studies from sources such as the University of Kentucky’s Food Systems Innovation Center.

New processes might include adding alternative sizes of products, or adding additional product types to the line of products you currently sell. Adding a separator or in-line pasteurizer to your facility, or HTST or UHT instead of vat pasteurization would also count.

Eligible projects involve: (a) modernization, specialization, and grazing transitions on dairy farms, (b) value chain and commodity innovation and facility and process updates for dairy processors, or (c) dairy product development, packaging, and marketing.

Projects that are ineligible involve: (a) real estate purchases, (b) repayment of loans or mortgages, (c) rent or contract payments for time periods extending beyond the 12-month period allowed for eligible projects, (d) legal fees, or (e) lobbying, fundraising, or other political activities.

The Dairy Business Innovation Initiatives Subaward Application may be found at Tennessee Department of Agriculture’s website, on the left side of this page, or it may be requested directly from Kyle Hensley at kyle.hensley@tn.gov or at (615) 767-9758.

The project outlined in the application must be completed within 12 months of approval. Recipients of subawards agree to provide a progress report 12 months after the project is completed, and a final report by August 31, 2022. The reports should include information about outcomes of feasibility studies, market analyses, business plans, increases in sales and markets reached, new products or processes developed and jobs obtained or created as a result of the project. Those applicants with a current dairy processing or marketing business will be asked to provide a baseline of sales in dollars and an initial customer count at the beginning of the project.

No, you will not be required to do so.

Recipients will be reimbursed in full following a receipt of a paid invoice and approval by the Tennessee Department of Agriculture.

No, you will only be reimbursed for approved items bought after your application’s approval.

The first progress report is a written report due 12 months after the project is completed. The final report is due by August 31, 2022.

Description of the project intent, summary of the project accomplishments and outcomes, including: dollar amount of increase in sales, increase in markets reached, new products or processes developed, jobs retained or created. In addition, there should be other insights from project execution, including, wherever possible, industry-wide benefits. Side note: The Tennessee Department of Agriculture and University of Tennessee Extension reserves the right to modify reporting requirements during the course of the project.

Image of collaborators and funding for Dairy Gauge program

Visit the TDA, Tennessee Dairy Business Innovation Initiatives Grant webpage for more information

Contact you local county Extension office and find an agent that can help with your dairy needs.