If you’ve been following my cost-cutting blog series, you’ve probably picked up a few tips for saving money in your child nutrition program. In the first blog, we discussed four tips, including streamlining labor tracking and implementing e-Marketing. In the second blog, four more tips were offered, including trimming the menu and practicing invoice reconciliation.

In the third installment of this series, you’ll learn how to save your program money simply by changing the way you think about commodities.

“Commodities”, as we all know, is the former term given to USDA Foods – although many of us still refer to them as commodities today. USDA Foods are “high quality, 100% American-grown” foods, which recipient agencies (including K-12 school districts) are entitled to under federal law. This not only supports the nutritional goals of the NSLP, but also the American agriculture industry. These commodity foods are dispersed via the USDA’s Food and Nutrition Services Food Distribution Program.

For SY 2017-18, we know that schools participating in the National School Lunch Program (NSLP) are entitled to 32 cents for every lunch served in SY 2016-17. So, as Barry Sackin, SNS explained in this useful article, the money in your child nutrition program’s Planned Assistance Level (PAL) account to be used to purchase USDA Foods is equal to “the preceding year’s lunches served times the current entitlement rate.” Let’s say you served 500,000 lunches in SY 2016-17. Multiply the lunches served times the current entitlement rate to find out your PAL account balance for the coming year, like you see in the equation below.

Fun Fact: Chris Facha, the current president of the American Commodity Distribution Association (ACDA), states that the anticipated entitlement rate for SY 2017-18 is $.335. That means even more money in your PAL account next year! USDA adjusts the rate each July along with meal reimbursement rates.

Now that we’ve covered the fundamentals of commodities, I need you to all repeat after me:

There’s no such thing as a “free” commodity.

“But the commodities are free,” you might say. “We didn’t pay for them; they were given to us by the USDA.”

But valuing your commodities at $0, or treating your PAL account like it’s full of Monopoly money, is a big no-no in child nutrition programs. Let me explain why.

“Free” Isn’t Really Free

What’s that old idiom – “nothing is free”? The same is true for USDA Foods. While your PAL deposit isn’t actual cash that can pay your food bills, it is very real and has value. Think of your PAL account like a gift card to the USDA grocery store. This gift card was preloaded for you by somebody else (the USDA) with funds from somebody else (the American taxpayer) – now all you have to do is put it to use!

USDA Foods have tremendous value, according to Facha. He stated that these commodities account for approximately 15-20% of the total food used in the NSLP – so long as program operators utilize them efficiently. “A variety of proteins, fruits, vegetables are available from USDA,” he said. “There is something for everyone, from pulled pork to fresh fruits and vegetables.”

The Art of Forecasting

Facha says that USDA Foods should be a part of planning and forecasting for the next school year, just like you plan and forecast for your program’s commercial purchases. Always compare commercial food prices to commodity food prices in order to save money, and order only the USDA Foods that are the best value for your program that you plan to fully utilize.

Forecasting can seem like a daunting task, but when executed correctly, it can help save your program lots of money. Take a look at each product you plan to use in your menus in the upcoming year. You should also review how much “commodity” money vs. how much “regular” money you spent based off of your program’s history. You should also take a look at your projected menus when determining where to utilize your PAL dollars – make decisions based on what you will serve, not what you did serve.

Costing Commodity vs. Non-Commodity Items

Whether you’re using a USDA Food or a non-commodity food in a recipe, it’s important to keep your costs in line to be as fiscally responsible as possible. When costing out a recipe for chicken and the chicken is $10 for that recipe, remember that the chicken will cost you $10 whether it’s commodity chicken or not. If it’s non-commodity chicken, you purchased it with $10 in “real money”; if it’s commodity chicken, you didn’t necessarily pay to get it, but it’s $10 in wasted money if you don’t use it. Generating revenue for non-commodity chicken will help you break even on the amount you spent to purchase the chicken from a vendor. Revenue for commodity chicken, however, helps to meet your budget so you’re allowed to have wiggle room in other areas.

Use It or Lose It!

As I mentioned in the previous cost-cutting blog, items in your inventory should be treated as stacks of cash on the shelf. It’s also necessary to look at all commodity items on your shelves as assets. But, they only truly become assets when they are used.

Facha explained that not using USDA Foods is a direct loss to child nutrition programs. When it comes to your PAL account – if you don’t use it, you lose it. This actually takes on two different meanings. For one, if you do not tap into your PAL account by the end of the school year, that money is completely wasted as it does not roll over into the next year. Second, even if you do purchase USDA Foods with money from your PAL account, if you are not actually using those items, you are losing them. All those unused frozen veggies in the back of your freezer that you purchased but didn’t forecast and plan for? A total waste. Use that PAL account, but use it wisely!

Treating your USDA Foods as assets, and looking at your PAL account like an actual bank account, is the best way to get the most out of your commodities. Begin planning and forecasting your USDA Foods for the following year as soon as possible, so you are ready to submit your commodity requests to the State agency at the beginning of the new year. The deadline varies from state to state, but most state orders are due to USDA beginning in April. Changing the way you think about commodities, and properly planning for them, will be a great money-saver for your program!

Share Your Thoughts

What are some issues you run into when it comes to forecasting and planning for USDA Foods for the upcoming year? Which USDA Foods are a fan favorite in your child nutrition program? Any other thoughts about commodities you’d like to share? Leave them in the comments below!

Find Out More

To learn more about how PrimeroEdge can improve your communication with the State agency and simplify managing your commodities, check out the PrimeroEdge Food Distribution module.