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Small-Scale

Dairy Farming Manual

Volume 1

Technology Unit 8
Milk Payment

page 131

Extension Materials
How much money does the dairy pay for your milk? 
( 1 - 6 )
 

The dairy pays according to: 

- quality 

- quantity.

How does the dairy pay for quantity? ( 7 - 11 )
 
 
 
 

The dairy pays for quantity if your milk is high quality.
 

How does the dairy pay for quality? ( 12 - 35 )
 

The dairy pays according to: 

- composition quality 

- physical quality and hygiene.

 

page 133


 
Milk Payment

(Numbers in brackets refer to illustrations in the extension materials)

Payment for Quantity and Quality (1-6)

The basic points to be considered in a milk payment system are

 Quantity of the milk 

 - Volume
 - Weight

 Quality of the milk 

 - Compositional
 - Microbiological
 - Physical
 - Hygienic
 

Dairies use one or more of these for milk payment all over the world.  Other conditions such as quotas, contracts or subsidies fit into milk payment systems to satisfy interest groups of dairy farmers or national dairy policies.

If only the quantity payment is used,  milk producers may adul-terate the pure milk.  If quantity payment goes with quality payment, adulteration does not pay back the transportation cost of the extra volume and the inferior quality.  This, and fines or punishment, make adulteration tests unnecessary in countries with quality payment.

Milk of poor quality makes poor quality dairy products, even with heat treatment or other quality preserving operations.  It is advisable to lay down regulations for a premium/deduction system based on tests such as the resazurin test, the methylene-blue test or the alcohol/alizarin test.

page 134


 
1    How much money does the dairy pay for your milk?
2     The dairy tests your milk and pays you according to the quality.
 

 

  3    If your milk is high quality the dairy pays you more money.
 
 
 

 

  4    If your milk is low quality the dairy pays you less money.
 

 

page 135


 

A payment system based on microbiological quality encourages dairy hygiene on the farm.  Tests of foreign matter in milk are unsuitable as a basis for milk payment.  The sediment test can, however, be used as a valuable advisory test.  Special conditions require quality tests, for example, in countries where low cooling on the farm and 2-3 times weekly milk deliveries per farm encourage a microflora of psychrophilic protein digesting bacteria.  A normal resazurin or methylene-blue test would give false results if carried out on such deep cooled milk samples.  To sort out inferior deep cooled milk the organoleptic test is used and for payment purposes individual milk samples are grown on selective substrates.  The number of colonies counted after a predetermined period gives the basis for a payment premium or deduction.
 
page 136


 
5    If your milk is very low quality the dairy rejects it.
6    These farmers all produce high quality milk.

The dairy pays the same for each can according to quantity.

page 137


 
Payment for Quantity 

There are in general two different ways of measuring milk.

1.    Volumetric measurement (litres/gallons)

(1)    Dipstick method

The dipstick method uses a graduated stick which can only measure the content in containers of equal size.  One  dipstick with graduations can measure the content of 40 litre cans, but the same stick cannot be used for measuring the content of other types of containers.

The most secure method has a special matching container.  Measure all milk with the dipstick in the special con-tainer.

The dipstick method is mainly used for large quantities of milk in containers such as stationary tanks, rail tankers and road tankers.

(2)    Container method

The container method is mainly used for sales of milk to consumers and for internal work in the dairy.

Containers are made either to hold definite quantities of milk such as 1/2 litre, 1 litre or they are made with inside   graduations, from which the milk level in the container can be read.

(3)  Flow-meter method

In modern road tankers the milk is measured by a flow-meter i.e. volumetric measurement.  The tanker is usually equipped with a deaerator which removes air that may have entered the milk during pumping etc.  High air content will result in increased milk volumes.  Before payment to the farmer litres can be converted into kilos : litres x specific gravity = kilos.

2.    Gravimetric measurement (kilos/pounds)

The most common method for measuring milk from farmers is the gravimetric method.  A wide variety of weighing machines and scales are used for this purpose.

Small cooperative societies usually use a spring balance.  This is not completely reliable and can easily give wrong readings.  Frequent adjustments even on the same day may be necessary.  As all farmers are treated equally and have their milk quantities weighed by the same scale, this method is good enough in the early stages of dairy development.  Later on, better weighing equipment is necessary.  Milk reception plants normally have suitable weighing scales, weighing exactly the quantities of milk received.

page 138

How does the dairy pay for quantity?
7    If your milk is high quality the dairy pays you for the quantity you deliver.
 8    This farmer's milk can contains about 10 L.
 

Full of milk it weighs 12 kg.
Empty, it weighs 2 kg.

9    The quantity of milk is 

12 - 2 = 10 kg

10    For each kg of high quality milk he receives 5 mu.

Therefore, for 10 kg he receives:
10 x 5 = 50 mu

page 139


 

In the following methods, 2 farmers delivering similar amounts of milk  with differing composition and microbiological quality are paid  according to different payment methods.
 
INFORMATION                             METHODS
                                                       (see descriptions below)

                                                             1 to 6A                   6B

Farmer 1     :100 kg milk 6 % fat       1st class                 3rd class

Farmer 2     :100 kg milk 3 % fat        3rd class               1st class

Price           : Butter price                       :   60 mu/kg
                    Fat consumption                 :   85 fu/kg of butter 
                                                                                                    (fat units)

                   Skim milk price                      :   2 mu/kg
                   Whole milk price                    :  5 mu/kg
                   Premium for 1st class milk    :  1 mu/kg
                   Deduction of 3rd class milk   :  1 mu/kg

                   Fat price               :   Butter price x 100   =  Fat price
                                                     Fat consumption

                                                  :  60 x 100 = 70.5 = 70 mu/kg
                                                           85

1st Method: Payment according to quantity
 
Farmer No.
Kg milk 
mu/kg
Total price
1
100
5
500
2
100
5
500
Total
200
10
1000
page 140

11    Two farmers produce 100 kg of milk each. If the dairy pays them by quantity only, they get the same money.
100 kg milk @ 5 mu/kg 

= 500 mu
 

100 kg milk @ 5 mu/kg 

= 500mu

page 141

How does the dairy pay for quality?

They use fat for making cream, butter, cheese and other products.
12 

The dairy pays according to three kinds of quality.
 
 
 

Composition
The dairy pays you for the fat in your milk.
 

 

Physical appearance
 
 
 

13    The dairy pays you more for milk which has a good appearance and taste.
 
 

 

Cleanliness
 
 
 

14    The dairy pays you more for milk which is clean and contains few bacteria.
 

 

page 142

How does the dairy pay for composition quality?
15    If your milk has high fat content the dairy can make more milk products.
16    The dairy pays more for milk with high fat content than for milk with low fat content.
17    The dairy may set a minimum fat content e.g. 3 % fat.

If the fat content is above the standard you get more money.

If the fat content is below the standard you get less money.

page 143

Here is an example from one country
18    This farmer receives 5 mu/kg milk.
19    For the minimum of 3 % fat, he receives 3 mu/kg milk.
20    For each 1 % of fat over the 3 % minimum, he receives 1mu.

For each 0.1 % fat over the 3 % minimum he receives 1/10 mu.

page 144


 
21 

For 3 % fat milk, he receives:
3 mu for the fat

5 mu for the milk

= 8 mu

22 

For 4 % fat, he receives:
4 mufor the fat
5 mu for the milk  = 9 mu
For 5 % fat, he receives:
5 mu for the fat
5 mu for the milk  = 10 mu
For 6 % fat, he receives:
6 mu for the fat
5 mu for the milk  = 11 mu

More fat gives more money.

  page 145

Example:

These two farmers produce 100 kg milk each. The dairy pays them by quantity and composition.
23    The dairy pays

70 mu/kg for fat and

2 mu/kg for skim milk.

page 146


2nd Method: Payment according to quantity and composition. Fat paid according to the above information and skim milk according to skim milk supplied
Farmer
Kg milk
Fat %
Fat units
(fu)
Kg fat
Fat 
price
(mu)
Fat 
pay
Kg
skim
left
Skim
price
(mu)
Skim
pay
(mu)
Total
pay
(mu)
1
100
6.0
60
6.0
70
420
94
2.0
188
608
2
100
3.0
30
3.0
70
210
97
2.0
194
404

3rd Method: Payment according to quantity and composition. Fat paid according to the above information and skim milk according to whole milk supplied
 

Farme
Kg 
milk
Fat
%
Fat
units
(mu)
Kg
fat
Fat
price
(mu)
Fat
pay
Skim
price
(mu)
Skim
pay
(mu)
Total
pay
(mu)
1
100
6.0
600
6.0
70
420
2.0
200
620
2
100
3.0
300
3.0
70
210
2.0
200
410

4th Method: Payment according to quantity and composition. Fat paid according to the above information and skim milk according to whole milk supplied

 
1 kg 6 % milk
1 kg 3 % milk
Fat pay (mu)
4.2
2.1
Skim milk pay (mu)
2.0
2.0
Total price (mu)
6.2
4.1
Farmer
Milk Kg
Fat % 
Price/kg (mu)
Total pay 
(mu)
1
100
6.0
6.2
620
2
100
3.0
4.1
410

 

page 147

Farmer with 6 % fat milk:

24 
6 % fat
so 100 kg of milk contains
6 kg fat @ 70 mu/kg = 420 mu
                                         +
94 % skim milk 
so 100 kg of milk contains
94 kg skim milk @
2 mu/kg                 = 188 mu

The dairy pays him
for 100 kg milk.        608 mu

  Farmer with 3 % fat milk

25 
3 % fat 
so 100 kg of milk contains3 kg of fat @
70 mu/kg             = 210mu
                                     +
97 % skim milk
so 100 kg of milk contains 97 kg of skim milk @ 
2 mu/kg                = 194mu

The dairy pays him
for 100 kg of milk    404mu
 

page 148


 
The density of milk normally varies between 1.028 and 1.034 kilos per litre, but it is wise to test the density locally over a period to find the correct conversion value for that particular area.

The density depends on the content of water, fat and dry matter. If fat is removed from the milk the density will go up. If the milk contains extraneous water the density will go down. This fact can be used as an indicator for adulteration.

page 149


 
26    Milk also contains protein which makes your body strong.

Some modern dairies pay according to the protein content of the milk.

27  Never add anything to your milk.
28    The dairy will check the density of your milk.
29    If it is not correct, you will get less or no money for your milk.
page 150

How does the dairy pay for physical quality and hygiene?
30    The dairy will grade your milk in the following way:
- colour 
- smell 
- taste.

Your milk should look, smell and taste good.

31    Dirt

There should be no dirt.

32    Bacteria Count.

Cell count

The fewer bacteria and cells in your milk the better.

page 151



5th Method: Payment according to quantity and microbiological quality
Farmer
Milk
kg
Price
/kg
Total
Price
(mu)
Class
Deduct -ion kg
Premium
kg
Pay
(mu)
Total
pay
(mu)
1
100
5
500
1st
-
1
+100
600
2
100
5
500
3rd
1
-
-100
400

6th Method: Fixed kg price as Method 4 and microbiological quality

A: Farmer 1   1st class milk; Farmer 2     3rd class milk

Farmer
Milk
kg
Fat
%
Price
/kg
Total
Price
(mu)
Class
Deduct -ion kg
Premium
kg
Total
pay
(mu)
1
100
6.0
6.2
620
1st
-
100
720
2
100
3.0
4.1
410
3rd
100
-
310

B: Farmer 1     3rd class milk; Farmer 2      1st class milk
 

Farmer
Milk
kg
Fat
%
Price
/kg
Total
Price
(mu)
Class
Deduct -ion kg
Premium
kg
Total
pay
(mu)
1
100
6.0
6.2
620
3rd
100
100
520
2
100
3.0
4.1
410
1st
-
100
510
 
 page 152

33    The dairy puts the grades together and pays you more for milk with high physical and hygienic quality.
page 153


 
 In the above payment methods no expenditures, depreciation costs, bonuses, or other deductions are considered. Before paying the milk producer for his deliveries, it is very important, especially in a cooperative, to make these deductions. When the farmer is paid for his milk, it is very difficult to extract any funds from him to pay eventual overspending again.

7th Method: Fixed kg price including some general deductions
 

Item 100 kg 6 % milk  100 kg 3 % milk
Fat pay  420.0
   +
 210.0
   +
Skim milk pay 200.0   = 620.0  200.0   = 410.0

Less
 

Expenditures and running costs 5.0 5.0
+ +
Depreciation of equipment and buildings 0.5 0.5
+ +
Deduction of bonus payment 1.5  1.5 
+ +
Extension fund 5.0  5.0 
+ +
Deduction for price pool  1.0--> 13.0  1.0--> 13.0
Milk price per 100 kg 607.0 397.0

 
Farmer
Milk  kg
Fat %
Price /kg
(mu)
Total Price (mu)
Class
Deduct -ion 
(mu)
Premium
(mu)
Total
pay 
(mu)
1
100
6.0
6.07
607
1st
-
100
707
2
100
3.0
3.97
397
3rd
100
-
297
 
page 154

34    Farmer with 6 % fat milk:
35    Farmer with 3 % fat milk:
The first farmer gets more than double for
the same quantity of milk because his milk has:
- higher compositional quality (fat content)
- higher physical and hygienic quality
(cleaner, fewer bacteria).
page 155


 
What do you know about milk payment?
     
    Payment for your milk
    1.   Payment according to milk quality
    (1-4, 6)
    2.   Rejection of low quality milk 
    (5)
    Payment for quantity
    1 Payment according to quantity if quality high 
    2 Example 
    (11)
    Payment for quality
    1 Types of quality 
    2 Composition quality
    - Fat content
     (15-17)
    - Examples of payment according to fat content
     (18-25)
    - Protein content
    (26)
    - Adulteration 
    3 Physical quality and hygiene
    - Grading according to: 
    (30)
    - colour
    - smell
    - taste
    - Dirt 
    (31)
    - Bacteria/cell counts 
    (32)
    - Overall grading 
    (33)
    - Example

page 156

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