Clover has announced a new purchasing scheme that will see an average increase of R0,15/ litre for milk producers. The company was also moving from a cost to serve purchasing model to a concentration premium model. This meant that smaller farms that were in close proximity to one another would benefit from higher prices as the volume collected from that area will be higher.
Dr Koos Coetzee, chief economist for the Milk Producers Organisation, welcomed this announcement as it held benefits for smaller farms. “The smaller farmers are often sidelined in the industry and get lower prices because they don’t have big volumes. But their input costs are usually higher. With this model they can get the same prices as big farms.”
He noted that although the increase was good news, farmers needed much more than 15 cents per litre to stay afloat.
Manie Roode, deputy CEO of Clover, explained that the milk price paid to producers would be dependent on the quality of the milk with specific focus on butter fat content and solids within the milk. “There will be a sliding scale on quality and farmers will be paid accordingly. We will also pay capacity premiums to farmers who can deliver milk every second day.”
But Coetzee said that producers will only see the effect of the new purchasing scheme at the end of March. “By then each farmer will see who will be getting more for their milk and who will be getting less, based on the new model.”
