Dairies turn to powder milk stock as supplies fall

Dairy processors are now reconstituting powder milk into fresh milk for sale as the current drought cuts production from farmers by 30 per cent.

Director of Livestock Julius Kiptarus said the powder milk, which processors convert and store when there is excess milk in the market, is currently playing a big role in balancing supply and demand for the commodity.

The official said major processors, including New Kenya Co-operative Creameries and Brookside, had in excess of more than 1.2 million kilogrammes of the product, valued at Sh2 billion, which has been significant in supplementing supplies from farmers.

“Milk production has dropped significantly on account of the current drought. The two main processors that normally have huge reserves of powder are now reconstituting it to fresh milk,” said Dr Kiptarus.

Milk supplies to the processors had been on the rise since September 2015 and it maintained the same trend throughout last year, which kept consumer prices low.

This year, however, the prevailing drought has negatively affected milk production.

“Supplies from farmers have been falling since last month and we now rely on powder milk to supplement the available stocks delivered to the factory,” said an official at one of the processors.

Dr Kiptarus said the government is also holding some of the powder milk that it bought from processors and stored at the Strategic Food Reserve (SFR).

However, he said, no decision had been reached on whether the reserves would be released or not.

Strategic food reserves are mainly meant for relief purposes and emergencies to help households in need of food.

Last year, the government offloaded milk stocks worth Sh300 million from the processors under the SFR scheme.

By last June, the value of long life milk products that processors were holding was estimated at Sh4 billion.
These stocks normally impact negatively on the cash flow of the processor and the government is scouting for external markets to help factories offload excess products in times of glut.

Kenya’s milk products are uncompetitive in some external markets because they are expensive due to high cost of production.

In Uganda, a litre of milk sells on average at about Sh88, cheaper than in Kenya where a litre of branded milk retails at between Sh96 and Sh110.

The shortage of the commodity has seen consumer prices of milk go up for the first time in nearly one-and-a-half years by between Sh3 and Sh5.

A 500ml long life milk that has been selling at Sh50 is now going at Sh55 while fresh milk that used to retail at Sh43 is now selling at Sh48 at all the major supermarket.

Increased cost of the commodity results from a move by processors to raise producers’ price by Sh3 last week.
The scarcity of the commodity in the market is going to intensify competition for raw milk among the 25 processors as well as the hawkers in the country.