A ST Mabyn farmer has become the first in Cornwall to receive a grant from the Rural Development Programme for England which will enable him to process elephant grass.
James Mutton and his family will use the funding to help create a processing plant to turn miscanthus, or elephant grass, into livestock bedding.
The project will include building a new barn and installing new equipment, with the RDPE grant covering 40% of the cost.
Mr Mutton said that as well as his own crops, the plant would produce bedding for other growers.
"We expect to be processing our own miscanthus crops later this year with the bedding available from the summer.
"By 2012 we expect to be producing well over 1,000 tonnes.
"Originally, we had planned to use miscanthus for fuel, but there is a growing market for it as animal bedding, particularly for horses as an alternative to shavings and paper-based products because it has a low dust content.''
Head of food and rural affairs at the South West RDA, Rob Hatt, said the project had won funding because it would create a sustainable future for the Mutton family.
And it would also benefit other farmers and the environment.
"The raw material for the project will come from their farm and other local farms, and the finished product will be marketed locally.
"It should lead to a reduction in the amount of horse bedding transported locally,'' he said.
The RDPE, jointly funded by the EU and the Government, aims to support the creation of genuine sustainable farming, forestry and food sectors.