Excess Inventory at Commodity Processors

This Management Bulletin (MB) provides information and guidance regarding excess inventory of United States Department of Agriculture (USDA) donated commodity food at processors.

Each State Agency’s Food Distribution Program (FDP) staff are required by the USDA to oversee and address the issue of excess inventory located at a commodity processor’s location. Title 7, Code of Federal Regulations, Part 250.30(n)(1) [Note: Part 250.30(n)(1) is no longer applicable. Please refer to Part 250.35(d)] prohibits recipient agencies from storing more than a six-month supply of any donated commodity food items with processors.

Commodity processors are required to maintain inventory balances, submit monthly performance reports, and report carry-over and excess inventory balances to the FDP. In addition, commodity processors are required to communicate inventory balances by mail, phone, email, or the Internet to their recipient agencies (RA).

RAs are responsible for using and transferring commodities, implementing state inventory policies and procedures, and knowing their own inventory levels and balances. It is also important to keep the lines of communication open with processors and/or distributors regarding inventory issues.

The Nutrition Services Division’s FDP discourages districts from maintaining high inventory balances, as they are not cost-effective (for RAs or processors) and create costly storage fees and losses due to aging commodities. RAs sending USDA commodities to a USDA approved processor should consider current school year inventory levels before ordering commodities for the upcoming school year. RAs must ensure that no more than a six-month supply of each donated food is in any processor's inventory at any given time, including carry-over from the previous school year.

Effective immediately, the FDP will transfer commodity inventory to a State account from RAs that have not processed commodities during the last school year or have an average usage rate of less than 10 percent per month, based on monthly performance reports submitted by processors. Average monthly usage will be calculated by dividing the total pounds used for the year by the number of months the commodity has been at the processor’s location. The total pounds remaining divided by the average monthly usage is called “the average usage rate.” The FDP will send a letter to the RAs informing them of the pending transfer. The RAs will have 30 days from the date of the letter to place orders with the processor. Orders must be sufficient to bring the inventory balance to an equivalent of a six-month supply or less. If RAs do not place an order within 30 days, all excess inventory will be transferred into a State account. The State account will allow agencies who have negative balances or need additional commodities to use this inventory.

The FDP encourages RAs to work with processors throughout the school year to use their commodities or transfer them to an agency that will use them.

If you have any questions regarding this MB, please contact the Food Distribution Program Office by phone at 916-323-0865 or by email at FoodDistribution@cde.ca.gov.