Substitution and Valuation of USDA Cheese

This Management Bulletin (MB) provides revisions to U.S. Department of Agriculture (USDA) Policy Memorandum FD-049: Substitution and Valuation of USDA Cheese.

In November 2005, the USDA Food and Nutrition Service (FNS) issued Policy Memorandum FD-049, permitting processors to substitute cheese donated by the USDA with other varieties of cheese produced for the commercial market. The policy memorandum also allowed processors to commingle USDA cheese varieties eligible for substitution into a single book inventory for each state agency, and established a single value for all such varieties, based on the 33-month average price for cheese from the Chicago Mercantile Exchange.

In the revised Policy Memorandum FD-049, FNS will continue to provide the substitution option for certain varieties of USDA cheese, with some clarification. However, FNS will now assign separate values for USDA cheese varieties each school year, in an effort to align the USDA-established value with the actual purchase price for the cheese. The assigned values will be published by FNS for each school year. Because each variety of cheese will have a different pass-through value, processors may no longer inventory them together for reporting purposes. Please make this change, if needed, effective beginning with your March 2013 monthly performance report.

Processors may substitute the USDA cheese varieties listed in the table below with any other varieties of cheese of domestic origin. Processors must specify one primary cheese material number/code for each end item they produce. Processors may not substitute other varieties of USDA cheese.

Processors may not, under any circumstances, substitute cheese that is "cheese food," ''cheese spread," ''artificial," "alternate," "analog," "imitation," "replacement," "substitute," or the like for USDA cheese. Additionally, processors may not substitute for any backhauled cheese or commingle backhauled cheese and other cheese.

Except for the "specialty" cheeses indicated in the bullets below, processors may substitute any variety of cheese, full fat, reduced fat, low-fat, or fat-free, that is of domestic origin on a pound-for-pound basis for bulk USDA cheese and draw down against a recipient agency's USDA cheese inventory. For example, a processor may substitute one pound of commercial Reduced Fat Pepper Jack cheese for one pound of USDA 100010/110242 Natural American Barrel. "Specialty" cheeses indicated below may be substituted for the USDA cheese varieties in the above table in accordance with the designated substitution rates listed below.

• Gruyere, Parmesan, Romano, and Skim cheeses may be substituted for USDA cheese at the rate of 0.75 pounds of the substitute cheese for each pound of USDA cheese.
  
  
• Asiago, Blue, Gorgonzola, and Roquefort cheeses may be substituted for USDA cheese at the rate of 1.25 pounds of the substitute cheese for each pound of USDA cheese.
  
  
• Brie and Camembert cheese may be substituted for USDA cheese at the rate of 1.50 pounds of the substitute cheese for each pound of USDA cheese.
  
  
• Feta and Ricotta cheese may be substituted for USDA cheese at the rate of 1.75 pounds of the substitute cheese for each pound of USDA cheese.

Processors should use End Product Data Schedule 4 (EPDS 4) for end product formulations utilizing cheese substitution. Multi-state processors must submit EPDS 4 to FNS for approval prior to any substitution under this policy. All substitute cheeses are subject to the 100 percent yield requirement. Value-pass-through must occur at the price for cheese published by FNS for the specific school year.

If you have any questions regarding this MB, please contact the Food Distribution Program Office by phone at 916-324-7132 or by e-mail at FoodDistribution@cde.ca.gov.