Relief for consumers as milk price drops by Sh10

The price of milk is set to drop by Sh10 per half-litre packet Tuesday, easing pressure on the government which has been facing harsh criticism in recent months following a sharp increase in the cost of food.

Dairy processors announced the price reductions on Tuesday, attributing it to increase in raw milk supplies after onset of the rainy season. 

The dairy firms said importation of duty-free milk powder has also helped to improve supplies.

Brookside Dairy and New Kenya Co-operative Creameries, the two biggest processors, announced the price cuts that will see a half-litre packet selling at between Sh50 and Sh55.

“The forces driving market correction have commenced, with a major change being the improved supplies from farmers. We will continue to observe the motions in the market and react accordingly. Eventually, the markets are expected to reach an equilibrium level,” said Brookside Dairy director of milk procurement John Gethi.

Treasury secretary Henry Rotich a fortnight ago removed duty on powdered milk to allow importation of 9,000 tonnes of the product to ease the biting shortage.

The government also allowed duty-free import of maize and sugar while removing VAT on flour to check inflation in prices of basic food items.

“The decision has further been informed by the government intervention, through a gazette notice, allowing importation of duty-free milk powder to help bridge the raw milk shortage,” said KCC in a statement.

The volume of milk collected by processors fell by 36 per cent from 56.44 million litres in October 2016 to 36.11 million litres in February this year.

Milk prices had shot to an all-time high of Sh65 per half a litre packet following prolonged drought that lasted from December 2016 to May 2017, one the longest dry spells recorded in the recent past.

“The season caused scarcity of the product at the farm level resulting in a drastic drop by over 50 per cent of raw milk being supplied to the company’s milk collection facilities. This affected the producer price pushing it up from Sh30 to a historic high of Sh43 per litre, which in turn impacted the consumer prices to rise to over Sh60 per 500ml pack of fresh milk,” said the KCC statement.

READ: Costly breakfast as prices of sugar, milk hit new high

According to New KCC, the price drop will be felt beginning Thursday in the supermarkets.

The processor said it has recorded 20 per cent increase in milk supply as a result of the onset of rainfall being experienced in major milk producing areas.

Brookside registered a 30 per cent increase in raw milk supplies, attributing this to the increased producer prices to Sh42 per litre, as it sought to cushion farmers from the effects of prolonged drought that hit the country and depressed raw milk supplies.

“Shelf prices cannot remain at the current levels forever. There will be further changes in the market dynamics as the supply environment continues to improve as a result of the current rains being witnessed in many parts of the country,” said Mr Gethi.

The drop will mean that the price of a half-litre packet of Ilara will reduce to Sh55 from Sh65, Tuzo Fresh to Sh52 from Sh62 and Molo fresh to Sh50 from Sh60 with KCC fresh selling at Sh50 down from Sh60 at major retail outlets.