APPENDIX D

Sample Milk Purchase Agreement

This agreement is entered into on __________________________[Date] between _____________________[Buyer] and ______________________[Seller].

1. This agreement shall be effective from __________________[Date] through _____________[Date]. The parties named above may, however, elect to renew this agreement for another term.

2. Buyer agrees to purchase from seller ________[Species] milk not older than ____ days, to be used for the manufacture of cheese for the length of this agreement.

3. Either a) Buyer agrees to pick up milk at the farm, or b) Seller agrees to deliver milk to Buyer at a cost of $_____ per delivery.

4. Seller warrants that milk sold to Buyer shall be free of inhibitory substances and shall meet the standards set forth by the _____________ Department of Food and Agriculture for manufacturing of Grade _______ milk. Seller shall remain under State inspection throughout the life of the contract.

5. Milk must meet the approval of the Buyer based on any or all of the following tests:

a) Taste and odor

b) Bacteria*

i. Coliforms not to exceed ______/ml (_____ to_____/ml payable at 90%; ______ to ______/ml payable at 80%)

ii. SPC not to exceed ________/ml (_____ to_____/ml payable at 90%; ______ to ______/ml payable at 80%)

iii. LPC not to exceed _______/ml (_____ to_____/ml payable at 90%; ______ to ______/ml payable at 80%)

iv. PI not to exceed _____% of SPC (_____ to_____% payable at 90%; ______ to ______% payable at 80%)

v. Other …

c) Received at no less than 40°F (34°F preferred) d) Sediment (per dairy inspector’s test) e) Any counts over the maximum high count agreed upon are subject to rejection by the Buyer. In the event of a high count that does not change product quality, the first two deductions taken will be 10%.

6. Weekly costs of testing milk and shipping to lab shall be divided equally between Buyer and Seller. Frequency: Milk will be tested _________ by an outside lab and sent in by Buyer. If milk quality problems exist and more frequent testing is needed, Seller will pay costs and be responsible for shipping samples and proving to Buyer that milk meets quality standards before Buyer purchases milk again. Failure to produce milk that meets quality standards is grounds for cancellation of contract.

7. Buyer shall make no payment to Seller for milk that does not meet the conditions of paragraphs 4 and 5 above. Any payments made prior to testing the milk shall be credited to Buyer if milk does not meet same conditions.

8. If milk is shipped with inhibitory substances, or if milk is of such poor quality that cheese does not set up, the producer of that milk shall be financially liable for actual costs incurred by Buyer of labor, utilities, ingredients, transportation, and any other milk that was contaminated. Costs will be deducted from future milk checks. Seller will provide Buyer proof of liability insurance.

9. The price of milk will be based on a combination of butterfat, protein, and the time of year produced. The butterfat percentage × 0.66 + the protein percentage × 1.33 will yield a number which correlates to the payment schedule agreed upon. Buyer will make every effort to purchase all milk produced by Seller, but cannot guarantee to purchase more than Seller shipped in Seller’s lowest quarter of the previous year. Buyer agrees to purchase all milk produced from Seller before adding new producers or purchasing from other outside sources. Seller agrees to give first option for purchase to Buyer for all marketable milk.

10. Buyer will pay a bonus of 10 percent for milk that has lab counts for paragraph 5b, i–iii, at half or less. This means LPC and coliform counts less than ____ and raw counts less than ______.

11. Buyer agrees to renew this contract next year and purchase milk from Seller for another year provided Seller produces quality milk and similar amounts as in the previous year’s lowest quarter.

12. Buyer and Seller agree that this agreement may be suspended in the event of Acts of God or circumstances beyond the control of either party. Specifically, the agreement shall be suspended if Buyer dies or becomes disabled or incapacitated, either mentally or physically, so as to be unable to operate his/ her business, or if the plant is partially or totally destroyed so as to cause a halt in the business. In addition, the agreement will be suspended if the laws of any governing body prohibit Buyer from manufacturing cheese.

13. Buyer and Seller agree that this agreement shall be nontransferable by either party without the written consent of both parties.

Attach agreed-upon milk purchase base price and payment schedule.

*Bacteria counts left blank, as some agreements are for Grade A and others for Grade B milk.

Contract adapted from one provided courtesy of Sarah Shevett, California.