School Lunch, Child Nutrition, and Older Americans Commodity Program Improvement Act of 1987

School Lunch, Child Nutrition, and Older Americans Commodity Program Improvement Act of 1987 - Amends the National School Lunch Act with respect to the commodity distribution program. Sets forth requirements and procedures that the Secretary of Agriculture (Secretary) must observe in developing specifications for commodity acquisition for programs under such Act and the Child Nutrition Act of 1966, and for nutrition programs for the elderly under title III of the Older Americans Act of 1965.

Directs the Secretary to establish an advisory council on the distribution of donated commodities to recipient agencies. Requires the council to report annually to specified congressional committees. Terminates the council at the end of FY 1992.

Enumerates duties of the Secretary with respect to the provision of commodities to recipient agencies, including obligations to: (1) provide both technical assistance on commodity use and nutritional data; (2) monitor commodity conditions to ensure high quality; (3) establish procedures for commodity replacement when necessary; (4) establish certain guidelines and mandatory criteria to be used by State distribution agencies; and (5) monitor the ways in which such agencies carry out their responsibilities.

Sets forth criteria to be met before the Secretary may enter into a contract for the purchase of entitlement commodities.

Directs the Secretary by regulation to establish requirements with respect to a State distribution agency's: (1) warehousing and distribution systems; (2) delivery methods; (3) contracts covering the processing of agricultural commodities and their products for recipient agencies; (4) fees; and (5) minimum performance standards.

Requires the Secretary to: (1) issue regulations with respect to procedures for allocating donated commodities among the States and guidelines for intrastate commodity distribution; (2) provide for systematic cost-benefit analysis and monitoring of recipient agency reports concerning commodities suitable to recipient needs; (3) develop and implement a national field testing program to determine the acceptability of commodities to recipient agencies; (4) require, with specified exceptions, that recipient agencies purchase only food products that are produced in the United States; (5) ensure consistent interpretation by Department of Agriculture regional offices of the policies and regulations governing donated commodities; (6) provide certain entitlement commodities to recipient agencies free of charge; (7) report annually to specified congressional committees concerning the implementation of this Act within the targeted programs; (8) establish a letter-of-credit program based on specified pilot projects and offer to all recipient agencies, one year following this Act's enactment, the option of receiving such commodity letters-of-credit instead of entitlement commodities for the targeted programs; and (9) conduct a survey of recipient agencies to determine the package sizes and forms of noncommodity food products they commonly purchase locally with their own funds and report the survey results to specified congressional committees within 90 days following this Act's enactment.