Kev
Whoever feeds you controls you.
Have you noticed how milk processors and brokers will buy milk by weight from farmers (they use weighing machines to determine the quantity they will pay for) and then sell the same milk after processing/value addition to the final consumer by volume?
Here is the reason why this makes sense.
There is a commercial incentive to this principle, and you will shortly see why this is the industry standard way of doing things. The average density of milk is 1.032kg/l. Because of this, the processor is in in effect getting more volume of milk per weight paid for.
To get the volume of milk per Kg, you can do cross-multiplication, and you’ll end up with 0.97 litres of milk per unit. This means that the processor is getting 0.03 extra litres of milk per litre of milk bought “without paying for it”.
This may seem negligible when you look at it from the face value, but things begin to add up fast when you consider the volumes serious processors handle per day. For instance, let’s say a particular processor procures 800,000 Kgs of milk per day from farmers. This means the processor is getting an edge of (800000*0.03 = 24,000 litres of milk per day).
Now multiply that volume by the prevailing price of milk per litre and see the magic. Even if you give the process a 90% efficiency (which is unacceptable in the dairy industry), the figures are still looking up.
Yes, they do make losses from time to time. But they have measures in place to recover the losses. This is just one of them.
Here is the reason why this makes sense.
There is a commercial incentive to this principle, and you will shortly see why this is the industry standard way of doing things. The average density of milk is 1.032kg/l. Because of this, the processor is in in effect getting more volume of milk per weight paid for.
To get the volume of milk per Kg, you can do cross-multiplication, and you’ll end up with 0.97 litres of milk per unit. This means that the processor is getting 0.03 extra litres of milk per litre of milk bought “without paying for it”.
This may seem negligible when you look at it from the face value, but things begin to add up fast when you consider the volumes serious processors handle per day. For instance, let’s say a particular processor procures 800,000 Kgs of milk per day from farmers. This means the processor is getting an edge of (800000*0.03 = 24,000 litres of milk per day).
Now multiply that volume by the prevailing price of milk per litre and see the magic. Even if you give the process a 90% efficiency (which is unacceptable in the dairy industry), the figures are still looking up.
Do processors ever make losses?
Yes, they do make losses from time to time. But they have measures in place to recover the losses. This is just one of them.