School Lunch Reform and Why It May Drive Tyson's Dinosaur Nuggets to Extinction

Last Updated May 14, 2010 11:41 AM EDT

If advocates in the growing movement of school lunch reform -- everyone from Jamie Oliver and Rachael Ray to Ann Cooper -- get their way, schools districts will stop serving frozen, processed foods and instead serve up fresh meals cooked from scratch. This is good news for kids who eat daily helpings of fries daily and consume pizza for breakfast, but it's horrible news for companies like Tyson (TSN), ConAgra (CAG), the potato giant JR Simplot and the 112 other companies that sell food to schools through the little-understood government program known as commodity processing.

The program is big business for food manufacturers and it works like this. Through the USDA's National School Lunch Program, schools can either get various commodities -- meat, potatoes, cheese, fish, eggs, oil, grains and the like -- from the government for free, or they can choose to pay a food manufacturer to process these commodities into chicken nuggets, pizza, french fries, fish sticks, burritos and a host of other kid-friendly items.

While the free-of-charge option might sound like the obvious choice, most schools end up diverting at least some of their free commodities into frozen, processed food, in large part because that's what the USDA and the food companies want them to do.

The USDA argues that the program, which began in 1958, benefits schools because it gives them access to "a broader array of nutritionally sound, popular items, while keeping labor costs to a minimum." In other words, this allows that today's lunch ladies need to be skilled only in the art of opening freezer boxes, reheating and microwaving.

And Tyson, which is one of the largest beneficiaries of the commodity processing program, boasts that it can save schools money by producing more chicken nuggets for less chicken, as if this were a good thing. On a section of its K-12 web site entitled "Tools for Chicken Reprocessing," the company says its Krisp N' Krunchy patties "yield up to 7,200 EXTRA servings per diverted truck of chicken compared to similar chicken patties from other manufacturers." Tyson appears not to realize that this begs the question of what else is going into the nuggets to get so many nuggets from so little chicken.

Kate Adamick, a school reform consultant of the Jamie Oliver ilk, says that, contrary to popular belief, schools aren't actually saving money with this system. There are no numbers publicly available on how much money schools are forking over every year for commodity processing, but she estimates that it's between $300 million and $450 million, or about six cents a meal per student per day. (Though this estimate is likely quite low since last year the federal government spent $9 billion on lunch reimbursements.)

Instead of giving this money to Tyson, ConAgra and JR Simplot, Adamick says that schools could take the USDA's free food and then earmark all the money they're not spending on dinosaur nuggets for culinary training that would help the lunch ladies learn how to actually cook.

This is what's happened in school districts like those in Berkeley, Calif., Montecito, Calif. and Katonah, N.Y., which have hired Adamick to revamp their meal programs. And it's happening in other places too. School systems like California's Riverside Unified School District, Oregon's Eugene School District, Kentucky's Jefferson County Public Schools and Boston Public Schools are working with the USDA to strengthen their farm-to-school programs. For food manufacturers, it's essential to realize that there's a fundamental shift underway. It's no longer about giving kids exactly what they want all the time (hence pizza for breakfast). Tyson champions kids preferences for "portable dipping finger foods" and "tasty food that will entertain them," but these days it's the adults who know a thing or two about healthy food who are calling the shots.

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