A $2.7 million expansion project at an organic flour mill in Quebec's Estrie region has picked up a federal loan to help cover the bills.

La Meunerie Milanaise, based at Milan, about 70 km northeast of Sherbrooke, will get up to $814,393 in a "repayable contribution" from the federal Agricultural Flexibility Fund's AgriProcessing Initiative.

The funding is to go toward Meunerie Milanaise's installation of a new steel mill, which the government said Monday is expected to allow the company to double production capacity within three years.

The project is also expected to help the company cut down its operating costs and ensure product quality. The additional milling capacity is also expected to allow the company to expand its sales and increase its exports to the U.S.

With the interest-free funding, the company has "more than doubled our organic flour production and quintupled our packaging capacity," company president Robert Beauchemin said in a government release.

Previously, the company's production capacity was about 110 tonnes of organic flour per week, with packaging capacity of up to 30 bags per minute.

The company is considered a leader in the province's organic grain industry in Quebec, having launched in 1982 from a small on-farm mill installed by Beauchemin and Lily Vallieres, who have been growing organic cereal grains since 1977.

La Meunerie Milanaise's processing outgrew the farm's production, leading it to source organic grains from farms elsewhere in Quebec and from Ontario, Saskatchewan and the U.S.

Further expansion led the company to produce organic pastas in 1996, to build a larger plant in Milan in 1997 and add steel grinding wheels in 2004 to produce specialty white flours for bakeries.

"To expand, agriculture needs to rely on a value chain that is profitable at every stage, and La Meunerie Milanaise is a good example of success," federal Industry Minister Christian Paradis, the minister of state for agriculture, said in the same release.

Projects funded under the AgriProcessing Initiative must be completed by the end of March 2014. The initiative covers 50 per cent of eligible costs, up to $2 million per project, to buy new or new-to-company machinery and equipment.