Solving the commodity conundrum
By Mike Mitchelson

Minnesota leads the way for innovative tools allowing schools to purchase food.

Purchasing food for schools has never been as simple as just finding product and buying it, but Minnesota has taken two steps ahead of the nation to simplify the process into something resembling just that. One involves the state government, and the second the development of what amounts to a school district buyer’s co-op.

At the state level, with the Minnesota Rebate Program and its Cyber Linked Interactive Child Nutrition System (CLiCS), schools can select manufacturers’ products available with the schools’ regular commodities entitlements, and earn rebates by purchasing those products. Minnesota schools no longer have to deal with, say, boxes of USDA cheese deposited on the loading dock, and trying to find use for them.

The rebate program operated as a pilot program since the late 1990s, and was finally approved by the USDA in July 2006 for the 2007/’08 school year. “It makes it easier for schools to spend their entitlement dollars,” said Emily Malone, food distribution coordinator for the Minnesota Department of Education’s Food Distribution Program. “That’s what the goal was.”


First, a primer

Schools receive a commodity entitlement from the federal government based on the number of free- and reduced-price meals they claim (those meals go to kids whose families are economically challenged). The entitlement is “non-cash,” meaning no money is actually changing hands. Schools can spend this virtual money three different ways, Malone said.

The first is called Regular USDA Commodities, or “brown box” commodities, items such as cheese, chicken, ground beef, canned fruits and vegetables and other basics. Schools “survey” what they need, product is ordered from the USDA, its delivered to a central warehouse, and a broadline distributor picks it up and delivers it to the school or stores it for them until needed. “That’s the most popular distribution channel people use, and where they get the most bang for the buck,” Malone said.

The second method is Fee for Service. Schools can divert bulk pounds of pork and beef they order to a processor to be cooked into patties, meatballs, crumbles or taco meat. “(The processor) ships the product back to the school directly or to a broadline distributor, and they charge the school a fee for processing,” Malone said. “The school also pays for the spices and additives and boxes and packaging, shipping and handling. (The school uses) their entitlement for the raw ground beef, but they have to pay for everything else.”

The problem with these two distribution systems is the changing dynamic of the school kitchen with budget cuts, or size and capability. “Today, you just don’t want raw chicken in your (school) program because of the sanitary concerns, and then you’ve got to go through the cooking, and then, quite frankly, the kids don’t want to eat it,” said Ron Strasburg of Upper Lakes Foods, who served on the committee that developed the Rebate Program pilot. “They want to eat chicken nuggets or chicken strips.”

Further, small schools often can’t utilize the Fee for Service program. “A lot of times there’s a pretty big minimum (order),” Malone said. “You can’t just divert five pounds (for processing). You pretty much have to divert a pretty significant chunk.”

With the Rebate Program, a school can “survey” through the state a commercial manufacturer’s product, Malone said. For example, a company like Tyson might list a chicken nugget product. If the school’s distributor carried the product, the school could order the product using their entitlement dollars, say, 100 cases for the year. When the order is placed, a dollar value, say, $50, would appear on the survey indicating the rebate value. That, Malone explained, is the value of the USDA chicken that is in that product. “So each case of chicken nuggets that they buy, they’re going to apply for a rebate and get $50 back,” she said.

Malone’s job is to then summarize with the handy software program all the requests statewide for that particular Tyson product, order the chicken from the USDA using the schools entitlement dollars as she would the regular commodity program, but instead of the chicken being delivered to the central warehouse, it goes to Tyson for manufacturing.

Tyson (again, for example) pays the state for the chicken, the state holds the money within the CLiCS software. The schools then go to the CLiCS Web site on a monthly basis when they get an invoice from their distributor for the product, and submit a rebate for the value of the chicken in that box of nuggets.

What? So, schools can spend their entitlement dollars this way, and get money back?

Yes, Strasburg said. And schools can then use extra entitlement dollars to purchase something else, like fresh produce on the commodity program.

Basically, the Rebate Program gives schools flexibility to purchase product, and get the most out of whatever USDA entitlement dollars they receive. And, the program perhaps has had the unintended side effect of allowing schools to sculpt menus to fit recent nutritional requirements. “Schools could’ve had a hard time using their (entitlement) requirement, and it could have been a symptom of the fact that they couldn’t take anymore cheese because it was too high in fat, or no more applesauce because it was sweetened and had too much high fructose corn syrup,” Malone speculated. “And this has made it easier for them to make smart decisions and use their money in other areas.”


Cooperative buying

With education funding being what it is, school districts have been forced to get creative at every level, including their foodservice operations. In 2006, 13 school districts, including Minneapolis, Stillwater, Wayzata and Winona, banded together to form the Minnesota School Food Buyers Group in an effort to save money by buying certain products in bulk. The group decides, for example, on one pizza product, and approaches manufacturers to collect bids on the product. The group awarded contracts for 134 items in 14 different categories, such as pizza, cookie dough, yogurt, cereal, potatoes—and even chicken.

Yes, chicken, that commodity product from the USDA. The MFSBG found a nugget they liked, and went through the bidding process and found that they could purchase the product cheaper commercially than they could using their rebate dollars through the state programs, said Laurie Hanover, assistant director of purchasing for Anoka-Hennepin School District, who also supervises the billing for the buying group. “If it’s cheaper for us to buy (a chicken product) commercially, that’s what we’ll do,” she said. “But it doesn’t happen very often.”

But there are enough products on which money can be saved that captured other districts’ attention: The original 13 member districts projected their total savings to be almost $1 million for 2007/’08. The group’s ranks have swelled to 49 districts at last count. .