Milk Procurement Model
Milk purchases are based on the following principles:
Butterfat is purchased on a rand per kilogram basis and the minimum required butterfat content is 3,30%
Payment for protein is included in the payment for “volume and other solids” and the minimum required protein content is 3.00%
Each region has a unique pricing structure for volume. Clover does not service producers who supply less than 500 litres per day.
The density premium carries a weight of 70 % for distance and 30 % for volume. The distance is calculated to the nearest long term factory based on road distance.
The ideal milk has a bacto count of lower than 200 000/ml and a somatic cell count below 400 000/ml. A sliding scale premium and penalty system encourages producers to supply the best possible milk quality.
In addition to the above tests, Clover also regularly tests for added water and inhibitors in milk. Clover provides a further service to producers by regularly testing for brucellosis by means of the milk ring test. The milk urea nitrogen content is also regularly tested for ration balancing purposes. These tests are done at Lactolab, an independent laboratory.
Market perceptions are extremely important to Clover and due to negative consumer perceptions of the use of hormones, Clover does not purchase milk from herds treated with rBST. All Clover producers are required to sign a declaration where they undertake not to supply Clover with milk coming from cows that were treated with rBST.
Clover's Delivery Agreements
Delivery Agreements are freely traded within regions. A delivery agreement is a lifelong right that may be passed on to the holder's heirs. Producers acquire Delivery Agreements by purchasing them from existing Clover producers.
Clover's Supply Contracts
A Supply Contract is awarded only if the Delivery Agreement producers cannot supply Clover’s demand for raw milk in full. Producers have to commit themselves to a fixed period and supply volume, when they sign a Supply Contract. Most Supply Contracts run for a twelve month period, but longer periods can be negotiated, depending on market conditions. Supply Contracts are not tradable or transferable between producers.
Conditions for the Transportation of Milk
To make the transportation of bulk milk by Clover as effective and economical as possible, there should be good co-operation between Clover and the milk producers. Ample bulk tank capacity and proper cooling is of utmost importance.