A bill to amend the National School Lunch Act and the Child Nutrition Act of 1966 to preserve and enhance the historic relationship between agriculture and school feeding programs by (1) maintaining and improving the role of the United States Department of Agriculture in carrying out the price support, surplus removal and other programs which are designed in part to increase the consumption of domestic agricultural commodities and prevent waste; (2) maintaining and improving the role of the United States Department of Agriculture in determining the specific commodities and the amounts, quality, and timing of purchases for use in school feeding programs; (3) improving the purchase, delivery and payment mechanisms for such domestic agricultural commodities by increasing the levels of State and local responsibility; (4) enabling schools to improve meal acceptability and reduce plate waste by providing for maximum local choice in menu planning in line with local needs and tastes within established meal guidelines and standards; (5) achieving substantial cost savings at the Federal, State and local levels by using regular commercial channels of trade; (6) providing assistance to the States and schools to develop improved food procurement, storage, and sanitation methods for school feeding programs; the National School Lunch Act and the Child Nutrition Act of 1966 are amended to provide for the issuance of commodity letters of credit by the United States Department of Agriculture for the purchase of domestic agricultural commodities by schools to carry out school feeding programs in lieu of the purchase, storage, transportation, handling, processing and distribution of said commodities to the States by the United States Department of Agriculture, and for other purposes.

Amends the National School Lunch Act to direct the Secretary of Agriculture to issue commodity letters of credit each fiscal year to each State participating in the food service programs under this Act or the Child Nutrition Act of 1966 for the purchase of domestic agricultural commodities and other foods for use in carrying out these programs. Directs the Secretary to specify the types of commodities and other foods to be purchased with such letters, with special emphasis to be given high protein foods.

Establishes the national average value of commodity letters of credit for fiscal year 1981. Sets forth the formula for the periodic adjustment of such average. Apportions such letters to each State based upon the number of school lunches served in such State. Directs each State to further apportion the value of the letters received to each school based upon the number of lunches served in such school.

Directs the Secretary to forward to each State an advance program payment to be used by the State under the letters for the purchase of foods for the requirements of lunches and breakfasts. Substitutes such commodity letter program for the direct purchase and donation of commodities by the Secretary.

Directs the Secretary to issue commodity letters of credit in lieu of direct purchase and donation for the purchase of agricultural commodities for use in institutions participating in the child care food program. Sets forth the formula for determining the value of such letters. Permits each State participating in such program to elect to receive cash payments in lieu of some or all of such letters.

Directs the Secretary to make available to the Department of Defense the same payments and commodity letters of credit as are provided to the States for breakfasts and lunches to students attending dependents' schools outside the United States.

Amends the Child Nutrition Act of 1966 to substitute the commodity letters of credit for the direct purchase and donation of commodities by the Secretary.

Permits the Secretary to use funds of the Commodity Credit Corporation for the purpose of issuing commodity letters for specified programs. Establishes criminal penalties for violations respecting the application, procurement, claim for reimbursement, or record keeping in the commodity letters program.

Permits the issuance of commodity letters for summer camps for children. Amends the Comprehensive Older Americans Act of 1978 to permit the use of cash payments in lieu of the commodity letters.