Milk prices go up after supply dips despite heavy rainfall

What you need to know:

The prices have risen to an average of Sh40 for a 500ml pouch, up from Sh35, as milk processors said they have to pay farmers more to secure supplies.
Every year the industry grapples with milk shortage during the dry season and a glut that leads to losses when rains resume.

Milk prices have risen by up to five shillings for a half-litre packet in the past week, with processors attributing the increase to a drop in supply amid high demand.

The prices have risen to an average of Sh40 for a 500ml pouch, up from Sh35, as milk processors said they have to pay farmers more to secure supplies.

“We have experienced low intake (from farmers) particularly from the North Rift. We have even raised the milk prices to farmers but still have low supply,” said Kipkirui Langat, the managing director of New KCC.

Mr Langat said the reason for the drop in supply was unclear as it is coming when the country is experiencing heavy rains, but noted that supply has been irregular since May last year when it dropped due to dry weather.

Brookside, which is the largest milk processor in the country, said that demand was expected to continue rising, a factor that could push prices even higher.

“Currently, we are meeting our market requirements, but if current trends continue, demand may soon outstrip supply. Our projection is that demand is expected to continue on the upward trend,” said John Gethi, the general manager of Brookside Dairies.

The processors are now banking on the current rains, which the weatherman predicts could continue till early February, to boost milk supply.

However, some players in the market, while acknowledging there was a shortage, attributed the price increase to lack of competition within the sector. The national secretary of the Dairy Traders Association, John Wachira, said the shortage could also be attributed to the Christmas festivities, which may have reduced deliveries to processors.

Githunguri Farmers, processors of the Fresha milk, attributed the price hike to lower production at the farms.

Consumers had become the beneficiaries of a price war among processors as the milk prices dropped from highs of Sh44 per half litre pouch in March to below Sh35 from May 2012.

Every year the industry grapples with milk shortage during the dry season and a glut that leads to losses when rains resume. Plans to build a strategic milk reserve are yet to be implemented.

Brookside is also set to launch a powder milk processing plant in the early part of the year. The plant is targeted to convert milk delivered during high season into powder form that can be consumed during seasons of low delivery.