Series New Directors USDA Foods History, Processing and Distribution. July 15 2:15 PM
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1 Series New Directors USDA Foods History, Processing and Distribution July 15 2:15 PM
2 USDA Foods Program Background Mary Beth Flowers, SNS Training Coordinator FDD, FNS, USDA USDA Foods Processing Program Peggy Cantfil Special Nutrition Operations Branch Chief FDD, FNS, USDA USDA Foods Distribution Matthew Essner Missouri DOE
3 Intro to USDA Foods USDA Foods Video Why you should know about USDA foods USDA Foods Realities and Misconceptions What foods USDA offers USDA food ordering & procurement USDA food processing concepts & the flow
4 What are USDA Foods? USDA Foods Video
5 Why do you need to know about USDA Foods?
6 Why do you need to know about USDA Foods? Schools receive USDA Foods (101,000) You are interested in the their business You need to understand: What drives their business decisions? What role USDA Foods play in decisions? How are USDA Foods going to impact your business?
7 What drives school business? BUDGET REVENUE PARTICIPATION MENU LABOR PROCUREMENT TRAINING
8 Percentages are approximate and will vary by district
9 Food Distribution Programs Schools and Institutions National School Lunch Program NSLP Child and Adult Care Food Program CACFP Summer Food Service Program SFSP Household Feeding The Emergency Food Assistance Program TEFAP Commodity Supplemental Food Program CSFP Food Distribution Program on Indian Reservations FDPIR Other Disaster Feeding DF
10 The Misperceptions School lunch and commodities cause obesity USDA surplus commodities are the culprit Commodities are low quality Need replacing with
11 The Realities of USDA Foods Healthy Choices 100% American Grown Food safety standards are set high Account for 15 20% of school food purchases School districts are never required to accept items they do not want
12 The Realities of USDA Foods Play an important role in providing nutritious foods in school meals by offering: Less sodium Less sugar Less fat More fruits and vegetables More whole grains
13 What kinds of food does USDA OFFER to schools? What am I competing against? How can I market my products to compliment them?
14 How a food becomes a USDA Food Support "Dietary Guidelines for Americans Support new Meal Pattern Requirements Food Distribution Nutrition Initiatives: More fruits & vegetables More whole grains Less salt, sugar and fat Meet level of demand Successful commercial market history 100% U.S. supports ag market!
15 Foods Available List schfoods.pdf
16 USDA Foods Nutrition Initiatives Review product offerings continuously to ensure each supports Dietary Guidelines for Americans Enhance the foods available list to support the nutritional needs of recipients Make ongoing changes to reduce or eliminate sodium, fat, and sugar Seek healthy and kid friendly products
17 USDA Foods Improvements Reducing Sodium Low sodium in ALL canned vegetables 140 mg per serving (up to 77% sodium reduction) Sodium free frozen and fresh vegetables Low sodium tomato products 140 mg/svg eg. spaghetti sauce, salsa, whole, diced, paste Reduced sodium turkey ham 460 mg/2 oz ( 19%) Reduced sodium chicken fajita 220 mg/2 oz ( 28%) Reduced upper salt limit on mozzarella spec s Reduced sodium in processed cheese: +/ 45% Researching more low sodium foods: Pork
18 USDA Foods Improvements Reducing Sugar Unsweetened applesauce NO heavy syrup in canned fruit ONLY light syrup, juice, or water packed fruit Packing Medium Options Unsweetened 100% juices
19 USDA Foods Improvements Reducing Fat Purchasing 96 97% lean ham Purchasing 95% lean turkey ham Purchasing 95% lean beef patties Eliminated trans fats in frozen potatoes Added a fat free potato wedge Eliminated shortening Substituted white meat for chicken skin in processed poultry products Low fat bakery mix 1% low fat UHT milk Researching lower fat meat & cheese products
20 USDA Foods Improvements Increasing whole grains Whole grain tortillas Whole grain pancakes Whole grain macaroni Whole grain spaghetti Whole grain rotini Rolled oats Brown rice, direct & bulk Parboiled brown rice Dry kernel corn for processing
21 USDA Foods Improvements Increasing fruits and vegetables Sliced Apple & Baby Carrot Alternate Fresh F & V Pilots Bulk Apples for processing Frozen Broccoli Florets Increasing Whole Grain Products Exploring new products Exploring more improvements Communication Tools
22 USDA Foods Improvements Increased Ordering Options Fruits Vegetables Ham Beef Poultry Cheese
23 Meal Contribution of USDA Foods USDA Foods make up 15 20% of market value of the food served Improved USDA Foods Nutritional Profile Processed USDA Foods
24 USDA Ordering Systems Push Down System PCIMS Processed Commodities Inventory Management System BPR 2000 PARADIGM SHIFT Demand Driven System
25 How are ordering decisions made? By State Agencies: Ordering history Product demand Questionnaires & surveys Nutrition advisory groups Informal input from Schools By Schools: Their menus Storage capacity Distribution methods Fees District size Buying group/co op
26 How are orders submitted to USDA? Web Based Supply Chain Management WBSCM supports the domestic agricultural economy, nutrition assistance programs, food security programs and International food assistance programs of USDA and USAID. Domestic Programs: AMS, FSA, FNS Export Programs: FAS, USAID Demand Driven Product Ordering Integrated food purchasing Order tracking & receipting SAP Software
27 How are orders submitted to USDA? Who is required to used WBSCM? USDA State Agencies Receiving Organization
28 How are orders submitted to USDA? USDA offers products to SDA SDA Submits School orders to USDA Vendors notify SDA of shipments VARIOUS SDA offers products to Schools USDA submits orders to other USDA Agencies to purchase food VARIOUS SDA notifies Schools when products arrive VARIOUS Schools place USDA Foods Orders USDA Buys Food VARIOUS Schools request delivery of USDA Foods
29 USDA Purchasing Partners FNS AMS FSA Food and Nutrition Service Food Distribution Division Assist in order planning for USDA Foods Order Fulfillment, Customer service Agricultural Marketing Service Assist in order planning for USDA Foods Procurement of Poultry, Livestock, F & V, Accounts Payable Farm Service Agency Assist in order planning for USDA Foods Procurement Dairy, Grains
30 USDA Purchases Two Kinds of Purchases
31 USDA Purchases Direct Delivered fka/brown Box
32 USDA Purchases Bulk for Processing
33 USDA Foods Processing
34 Topics: Program Background What is Processing? Flow of Processing Processing Resources
35 Processing USDA Foods What is processing? Bulk USDA Foods > Processor Finished End Products Should my company consider it? Foot in the door Lock in commercial/processed items Meet menuing needs
36 USDA Foods FY 2012 TEFAP 27% CSFP 8% FDPIR 3% Disasters<1% Child Nutrition Programs 62% Estimated FY12 Total Purchases Program USDA Foods $ CNP $1,256,545,003 TEFAP $543,901,223 CSFP $157,547,443 FDPIR $56,209,016 Disasters $920,057 TOTAL $2,015,122,742 50% = Bulk for Processing
37 Why do schools process? Menu continuity Product familiarity Reduced training and labor Solves production challenges Increases Food Safety Maximize entitlement
38 How Schools decide What/If to Process Analyze purchasing needs Calculate annual usage Production Records Distributor Velocity/Usage Reports Cost analysis Compare Bid Prices with USDA Food Value Add in processing, distribution & administrative costs.
39 What is Processing?
40 What is Processing? State Distributing Agency USDA Processor
41 The Flow of Processing
42 The Flow of Processing 1. Entitlement allocation & decision to process 2. Agreements & end product approval 3. Inventory protection options 4. Procurement by school districts or State 5. State orders Bulk USDA Foods 6. USDA purchases USDA Food & delivers 7. Processing Methods 8. Substitution & Commingling 9. Sales, delivery, VPT 10. Monthly Performance Reports 11. Monitoring & Audit
43 The Flow of Processing 1. Entitlement allocation & decision to process
44 Entitlement ESTIMATE! JULY RATE X PRIOR YEAR MEALS +/ PRIOR YEAR BALANCE + 12% FUNDING = TOTAL ENTITLEMENT $$
45 National Ordering Averages Grains, Peanuts, Oils 3% Cheese 22% Fruits & Vegetables 25% Beef 22% Pork 5% Chicken 13% Turkey 9% Eggs 1%
46 SY11 Processing Diversions USDA Food Pounds Dollars Beef (coarse & boneless) 14% 95.8 M $194.5 M 28% Chicken (large, small & leg) 28% M $138.3 M 20% 48% Turkey (bulk & thigh) 5% 32.4 M $29 M 4% Cheese (bulk mozz & barrel) 12% 80.5 M $134.8 Dollars M 20% Potatoes (bulk, dehy, sweet) 28% 189 M $15.9 M 2% 49% Other USDA Foods 13% 90.8 M $63.4 M 9% Total diversions Pounds 49% M $575.9 M 48% Total purchases B $1.2 B
47 The Flow of Processing 1. Entitlement allocation & decision to process 2. Agreements & end product approval
48 Processing Agreements NATIONAL Multi State Processors 1) National Processing Agreement (NPA) 2) State Participation Agreement (SPA) In State Processors 2) State Master Agreements 3) State Agreements 4) Recipient Agency Agreement
49 Processing Information 112 National Processor Agreements 80 USDA food materials 5,000+ end products approved $400 $600 Million inventory
50 End Product Data Schedule i.e product formulation data Pounds needed to produce a case Under the NPA AMS Poultry & Livestock approvals FNS Everything else! Under State or RA Agreements AMS Poultry & Livestock approvals State Everything else
51 Summary (a list) End Product Data Schedule 1) SEPDS A fixed draw down 100% Yield Standard Yield Guaranteed Return 2) SEPDS B Guaranteed Minimum Return 3) SEPDS C hybrid of A &B
52 National Processing Agreement DOES NOT Eliminate bidding/procurement by SDA/RA Specify delivery and billing terms Specify value pass thru method Coordinate truck loading or ordering Monitor State inventory draw downs Verify minimum yield/return met Monitor acceptability or field complaints
53 How to get started with State State Participation Agreement (SPA) Approved SEPDS goes to each State Destination Data form for plant Complete & submit WBSCM Ship FNS creates new destination in WBSCM State requests new destination to be mapped to their organization
54 The Flow of Processing 1. Entitlement allocation & decision to process 2. Agreements & end product approval 3. Inventory protection options
55 Inventory Protection Bond Letter of Credit Escrow Account Year 1 = 100% Subsequent years = % of maximum Due May 31
56 USDA Foods Value November 15 USDA Food Price Used to determine: Value of surety bond, escrow or LOC Refunds or discounts Costs of replacement for production or USDA Foods losses Failure to meet GMR Transfer Value
57 The Flow of Processing 1. Entitlement allocation & decision to process 2. Agreements & end product approval 3. Inventory protection options 4. Procurement by school districts or State
58 The Flow of Processing 1. Entitlement allocation & decision to process 2. Agreements & end product approval 3. Inventory protection options 4. Procurement by school districts or State 5. State orders Bulk USDA Foods
59 How are orders submitted to USDA? USDA offers products to SDA SDA Submits School orders to USDA Vendors notify SDA of shipments SDA offers products to Schools USDA submits orders to other USDA Agencies to purchase food SDA notifies Schools when products arrive Schools place USDA Foods Orders USDA Buys Food Schools request delivery of USDA Foods
60 The Flow of Processing 1. Entitlement allocation & decision to process 2. Agreements & end product approval 3. Inventory protection options 4. Procurement by school districts or State 5. State orders Bulk USDA Foods 6. USDA purchases USDA Food & delivers
61 USDA Purchasing Partners AMS Agricultural Marketing Service Assist in order planning for USDA Foods Procurement of Poultry, Livestock, F & V, Accounts Payable AMS Commodity Procurement Website FSA Commodity Procurement Website FSA Farm Service Agency Assist in order planning for USDA Foods Procurement Dairy, Grains
62 The Flow of Processing 1. Entitlement allocation & decision to process 2. Agreements & end product approval 3. Inventory protection options 4. Procurement by school districts or State 5. State orders Bulk USDA Foods 6. USDA purchases USDA Food & delivers 7. Processing Methods
63 Processing Methods 100% Yield Guaranteed Minimum Return (GMR) Standard Yield Guaranteed Return (GR)
64 The Flow of Processing 1. Entitlement allocation & decision to process 2. Agreements & end product approval 3. Inventory protection options 4. Procurement by school districts or State 5. State orders Bulk USDA Foods 6. USDA purchases USDA Food & delivers 7. Processing Methods 8. Substitution & Commingling
65 Substitution & Commingling Full Substitution Limited Substitution Substitution & Negative Inventory Non Substitution Commingling
66 The Flow of Processing 1. Entitlement allocation 2. Decision to process 3. Agreements 4. Procurement 5. State orders Bulk USDA Foods 6. USDA purchases USDA Food & delivers 7. Processing Methods 8. Substitution & Commingling 9. Sales, delivery, VPT
67 Sales & Value Pass Through Methods Type of Sales Direct Sales made directly from the processor to the State or school Indirect Sales are made from the processor to a commercial distributor
68 Sales & Value Pass Through Methods Method for Passing the Value Refunds School pays gross price and requests reimbursement from processor for commodity value contained in purchased products Discounts Net price paid by school
69 The Flow of Processing 1. Entitlement allocation & decision to process 2. Agreements & end product approval 3. Inventory protection options 4. Procurement by school districts or State 5. State orders Bulk USDA Foods 6. USDA purchases USDA Food & delivers 7. Processing Methods 8. Substitution & Commingling 9. Sales, delivery, VPT 10. Monthly Performance Reports
70 Monthly Performance Reports Nuisances encountered in the day to day operations of a USDA Foods processing program that are reflected on the MPR: Front loading inventory What information do you need to draw down the inventory? Transfers: physical vs. paper Condemned product and damaged food
71 Monthly Performance Reports Nuisances encountered in the day to day operations of a USDA Foods processing program that are reflected on the MPR: Effect of commingling (GRO)or substitution (GMR commodity for commodity) inventory on the paperwork Effect of substitution on grading certificates What happens when you ve made product a school indicated they would purchase, then receive a transfer request.
72 What do we do with MPRs? State monitors inventory on MPR Processors should only draw down what was produced & delivered Six month inventory limit Request destination changes Paper transfer between processors Understand State policies
73 The Flow of Processing 1. Entitlement allocation & decision to process 2. Agreements & end product approval 3. Inventory protection options 4. Procurement by school districts or State 5. State orders Bulk USDA Foods 6. USDA purchases USDA Food & delivers 7. Processing Methods 8. Substitution & Commingling 9. Sales, delivery, VPT 10. Monthly Performance Reports 11. Monitoring & CPA Audit
74 Processing Resources: ACDA Website: RA Processing Handbook EPDS/SEPDS Templates Processor Guidance Distributor Agreement
75 Click on Processing tab
76 Processing Resources: Food Distribution Website: Main Page: Processing Policy Memos:
77
78 NSLP Resources
79 USDA Foods Distribution
80 MO DESE School Food Services Donated Foods Program Mission Statement Provide tools and products Operate with integrity Offer outstanding customer service Showing respect We are held accountable for the decisions Keep an open mind to new ideas Operate efficient program. We strive to have a positive effect on students
81 IT S ALL ABOUT THE MONEY
82 Role of the State Distributing Agency SDA monitors State Entitlement and Inventory USDA views Entitlement by State, so MO monitors Entitlement as a State Each RA's Entitlement is a portion of the State's Entitlement (could vary from the RA's Total Lunches Served (TLS) x per meal rate) Entitlements are based on projected TLS
83 Role of the State Distributing Agency TLS figures used are from previous SY but effect 3 SY Don't know exact Entitlement until November AFTER all meals are served By November, most trucks for the current school year are already purchased/bid
84 Entitlement = Moving Target
85 Entitlement = Moving Target What does it mean to you? Entitlements up or down for SY14? Should I track my Entitlement throughout the SY? Expected Difference between Entitlement and Bonus? Who determines? Value of Commodities vs. Entitlement 12% Provision via NSLA Historical Figures $ $ $ $ $ $ $ $ $ $ $ $ $ $0.1575
86 USDA Foods Calendar When do Schools order?
87 What it s like in Missouri One state contracted warehouse (69,709 sq miles) State pays for all storage, handling, delivery charges for public RAs USDA Brown Box = FREE for Public RA Non-Public pays delivery fee of $1.85 About 60% Entitlement to USDA Brown Box 40% towards Processing FFS, NOI, MFFS, and Rebates all offered
88 USDA Foods Calendar When do Schools order?
89 USDA Foods Calendar When do Schools order? Depends on the item USDA items MO schools order by 15 th of the month for delivery the following month Processed items plan diversions prior school year Net-Off-Invoice (NOI) is ordered commercially
90 USDA Foods Calendar When do Schools order? Depends on the item State coordinated delivery depends on the State s delivery options MO schools receive once a month delivery August April But each state is different
91 USDA Foods Calendar Bidding Cycle Not very convenient State of Missouri receives pricing in November for all of next school year RAs plan diversions by March prior to beginning bids for next School Year
92 USDA Foods Calendar How to Menu Does the cart go before the horse or the horse before the cart? What came first, the chicken or the egg?
93 USDA Foods Calendar The Great Paradox - How to Menu
94 Role of the SDA
95 Questions?
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