Farmers supplying Brookside are earning less since December 1 after the largest processor cut the price of raw milk by Sh3 per litre following increase in supply.
John Gethi, Brookside director of milk procurement, attributed the reduction to market forces that have pushed down the price of dairy products on the shelves.
“In the recent past, consumer prices of dairy products in the entire market have come down as processors strive to make these products more affordable to the public.”
“While the reduction of product prices will also enable us to expand our share of the processed milk market, it has also occasioned a knock-on effect on farm-gate prices,” said Mr Gethi.
The shelf price of milk products has declined marginally after remaining in the same range the whole of last year. A litre of Brookside milk is currently going for Sh135 from previous Sh145.
The move, however, has not gone down well with farmers who argue that the cost of production has been increasing over the years, and that it would be difficult for them to break even at the current prices.
“If you look at the cost of production, it has been increasing, we are spending more to produce a litre of milk currently and with low prices it means that we are not going to earn much,” said chairman of the Cherangani Dairy Moses Kiptanui.
Mr Kiptanui said the new the contract they signed with Brookside has actually cut the price of the produce from Sh37 previously to Sh34.
Kenya Dairy Farmers Federation also confirmed the Sh3 cut.
The cooperative supplies an average of about 80,000 litres of milk to Brookside every day.
A recent research by Egerton University’s agriculture think tank-Tegemeo Institute of Research indicates farmers practising zero-grazing are making a loss of Sh0.6 hence and are unable to break-even.
The study indicates that a zero-grazing farmer spends Sh19 to produce a litre.
Semi-zero grazers, those who do own production such as making their feeds and using their own labour, made an average profit of Sh5.6 a litre and open-grazers a mean of Sh7.9.
The processors have in the meanwhile been expanding their facilities to tackle the milk glut and manufacture long life products to tap into the regional market.
Brookside installed a milk drying plant in 2014 as it expanded capacity for the intake of raw milk. The milk supply to processors has been on the upward trend since September 2015.
The battle for control of raw milk market though is set to intensify with new entrants looking to eat into the market share of existing players.
Sameer Agriculture & Livestock Ltd (SALL), intends to open a dairy plant in Nakuru increasing the number of major players in the industry.
This could shake up a market that has been dominated by three major players—Brookside, New KCC and Githunguri.
Currently, there are 25 active milk processors with Brookside leading in both raw milk intake and processed products market according to Kenya Dairy Board (KDB).