Will Supply Chain Disruptions Impact USDA Foods?

“Tsunami Warning,” in School Nutrition’s August 2021 issue, explored many of the challenges school nutrition operations will face in the coming year, including lingering disruptions in the supply chain for K-12 ingredients and menu items. Will USDA Foods purchases and processing be affected? What about the impact of shortages on meal pattern? Author Barry Sackin, SNS, reached out to the agency to find out. Answers from a USDA spokesperson follow: 

Q: Do you anticipate any disruptions in filling school requests?
A: USDA purchases food items throughout the year to fulfill requests from states and school districts. Initial purchases for SY 2022 have been overall successful. While there have been some small shortfalls across various product types, no widespread concerns have been identified. At this time, we do not anticipate any significant issues in fulfilling requests for USDA Foods in Schools, but this may change as products are procured and contracts awarded throughout the year. USDA is continuing to monitor the market situation and will provide updates to states about any potential procurement challenges.

Q: Is AMS (Agricultural Marketing Service) indicating any purchasing problems?
A: Conditions impacting the commercial market are also impacting USDA Foods. However, we are working closely with our suppliers to acquire the products needed by schools and other recipients. USDA is seeing some small product shortfalls due to factors such as vendor capacity, shortages in packaging material and raw product, weather issues, and transportation, but is taking steps to remedy these issues with some creative contracting vehicles and constant communication with vendors. At this time, USDA is not aware of any widespread procurement challenges for USDA Foods in Schools. USDA will continue to work closely with suppliers to acquire the products requested by states and school districts.

Q: Many states use commercial distributors for USDA Foods. Are these contracts secure? Will there be a challenge in distribution and if so, which states may be affected?
A: While USDA has heard about some issues with commercial distribution contracts that may impact USDA Foods, these contracts are procured at the state and local level, so we do not have insight into the specific impacts. USDA is ready to provide assistance to states and school districts to change the delivery location for USDA Foods direct deliveries in the event that there is a change to their distributor contract.

Q: How are market prices looking, and what impact will that have on volume? Schools plan their USDA Foods entitlement utilization around fair market value, but the entitlement is drawn down by actual prices paid. How will volatility in the market impact school purchases against entitlement? Should schools plan on a need to supplement their USDA Foods allotment with commercial products?
A: Conditions impacting commercial market prices are also impacting the cost of USDA Foods. Over the period January through May 2021, overall costs of USDA Foods increased by approximately 5% compared to the same period in 2020. However, the cost of many products were similar or lower than the same period last year, so the impact on volume will depend upon the products ordered.

Q: Are you looking at possible meal pattern issues, vis-à-vis menu item shortages? What flexibilities will schools have if/when they can’t procure certain items? I have heard that processors are trimming back their product lists and distributors are doing the same with SKUs. What impact do you anticipate will this have on schools and menus?
A: USDA is aware of the challenges school food authorities (SFAs) are currently facing with the supply chain. The current Nationwide Waiver to Allow Specific School Meal Pattern Flexibility for School Year 2021-22 allows for flexibility in the meal pattern. SFAs sponsors may use the regulatory authority found in federal procurement regulations [formerly at 2 CFR 200.320(f)(2), now at 2 CFR 200.320(c)(3)], which allows operators to use the emergency non-competitive proposal procurement method to negotiate a new one-year contract for School Year 2021-22. USDA continues to monitor the issues with the supply chain and appreciates the efforts SFAs are making to ensure nutritious meals continue to be served to students.

Q: What can operators do to mitigate menu problems and stay compliant?
A: USDA encourages operators to stay in regular communication with their state agencies regarding USDA Foods orders and concerns that arise throughout the year. USDA communicates regularly with states about the status of procurements so that operators have time to adjust their menus in the event that deliveries will be delayed or canceled.

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