Two Axes Formula Case Study

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Two Axes Formula India has been producing large quantities of buffalo milk when compared with any other country. This milk being rich in fat content always attracted good price in comparison to cow milk. The fat portion being visible (giving thickness), separable (yielding cream) and measurable (in %age) made it easier to decide milk price.

9. Kilo fat system A system based on ‘kilo fat’ became a practice for purchase of buffalo milk. Under this system, an amount in rupees per kg of fat means an amount payable on that quantum of milk which would yield one kg of fat. For example, when the rate per kg fat is Rs. 425, it means that the said amount will be paid for 16.66 L of buffalo milk with 6% fat (minimum standard):

1 kilo (1000gm)
fat and SNF, a system was devised called as Double–axis milk pricing. The purchase rate for fat and SNF are determined based on previous experience or ruling market prices/ consumer appreciation for buffalo milk fat (white ghee) vis-à-vis cow milk fat (yellow ghee) and for buffalo milk SNF vis-à-vis cow milk SNF (i.e. SMP). Accordingly, the difference between prices paid for buffalo milk and cow milk is reduced. Suppose the rate of Rs. 425 per kg fat (which can neither be purchased nor it is the selling rate for ghee normally) is translated into Rs. 190 per kg fat and Rs. 158 per kg SNF, then the purchase price for buffalo milk and cow milk is determined as shown below:
Purchase price for buffalo milk and cow milk

Calculated in grams per L of milk × price per grams of component. In this way, the cow milk is paid to the extent of 78% of the rate for buffalo milk. This also matches with 80% TS in cow milk compared to buffalo milk.
A ready reckon can be prepared depending on actual rates decided from season to season. For every 0.1 % increase in fat and SNF, the value per L can be worked out for buffalo/cow