Despite high expectations for operational efficiencies from the use of government-procured commodity foods
in the NSLP, as early as 1965 there is evidence from U.S. congressional hearings that some schools were
having difficulty with the provision of foods, rather than cash, as a portion of federal program funding. The
American School Food Service Association wrote to the Agriculture Committee in 1965 to “request that
commodity purchases be limited” (United States Congress, 1966). The association’s representative
explained that “many costs are involved in storage and transportation at the state and school district levels
which add substantially to the costs of [commodity] purchases.” The letter concluded, “We are confident
that...school districts would effectively utilize reimbursement payments at local markets.”
Recent research from Minnesota provides empirical evidence that this statement remains relevant. Based on
order data from all Minnesota schools in SY 2008-9, it was estimated that for every $1 spent on USDA
commodity products, schools pay on average an additional.12 cents to 27 cents to transport and store those
products, compared to an additional 2 cents to 3 cents cents for commercial equivalents (Peterson, 2009).
This research was restricted to regular packaged commodities and did not include commodities diverted for
further processing. However, the products in the Minnesota analysis constituted over 60% of the collective
commodity order value among schools in the state.
The Minnesota research also compared commodity food prices for 48 products to prices for commercial
equivalents to test the USDA’s claim that the commodity program offers lower unit prices to schools (USDA
Food and Nutrition Service, 2008). As demonstrated in Figure 2, 25% of the USDA commodities were more
expensive than commercial equivalents that were locally available. Once full procurement costs—including
product cost, handling, transportation, administrative labor, warehousing, inventory investment, and cost of
risk to hold inventory—were included in the cost assessment, commercial products on average were
estimated to be 9% less costly for schools than equivalent USDA commodity products.
Figure 2 Commodity Expenditure among Minnesota Schools, School Year 2008-9
expensive (o-12) 2S% more (n-18) toSO% more(rv∏3) (n-5)
Commercial compared to commodity price
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An analysis of Minnesota schools’ commodity spending highlights further concerns about the assumed
financial benefits that the commodity program provides to schools. As also demonstrated in Figure 2,
Minnesota schools directed just 3% of their collective entitlement funding toward commodity products with
the greatest price advantage over commercial products, and 11% of their entitlement value toward
commodity products for which commercial equivalents were less expensive.
The Minnesota research did not offer an opportunity to closely examine the factors that motivate an individual
school district’s ordering decisions. However, it was reported that prices paid for commodities were
substantially different from prices schools had seen at the ordering stage. From SY 2005-6 to SY 2008-9, the