Milk prices unlikely to fall as long-rains supply remains low
Milk prices are likely to rise should rains stop. PHOTO | FILE
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The Kenya Dairy Board says although milk volumes have gone up compared to last month, this is not sufficient to cause a drop in the price of processed milk.
Milk prices are unlikely to fall soon, the Kenya Dairy Board (KDB) has said, warning that the situation could worsen if the long rains stop next month.
Managing director Machira Gichohi says although milk volumes have gone up compared to last month, this is not sufficient to cause a drop in the price of processed milk.
Mr Gichohi said the high prices could persist at least for the coming two to three months.
“We do not expect a drop in the consumer price of milk because of increased demand of the commodity against unstable supplies,” he said.
The MD noted milk volumes have so far increased from 900,000 litres to a million litres a day, which is lower than what had been expected with the onset of the rains.
Milk processors had anticipated in excess of 1.3 million litres daily.
KDB met with processors last week and another assessment meeting is scheduled in the next two weeks.
The low volumes have seen the processors focus on fresh milk sales at a time they should be making long-life products such as UHT and powder milk as is tradition during the rainy season due to glut.
Processors, especially the New Kenya Co-operative Creameries (New KCC), normally convert powdered milk back into liquid partly for export. New KCC depends on regional exports of its value-added products to boost its revenue. It currently earns about Sh400 million a year.
Goods like butter and ghee are in high demand in oil-rich desert countries like Dubai and Qatar that depend on imports.
The regulator notes volumes are expected to shrink further with the onset of the cold season, increasing the pain for consumers.
“There will be big trouble if by any chance it stops raining next month as milk production normally drops in July with the onset of cold weather that negatively affects cows,” he said.
Milk prices have gone up by Sh10 for a 500ml tetra pak to Sh60 while the same quantity in a plastic pouch costs Sh50 up from Sh42 in January. The dry spell started late last year forcing processors to operate below their daily capacity.
But farmgate prices have improved as processors compete for supplies.
New KCC is buying a litre of raw milk at Sh41 while Brookside is offering Sh38.
Brookside commands a 44 per cent market share while New KCC has a 20 per cent stake.
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