New KCC has increased its buying price for raw milk by Sh6 a kilogramme to a record Sh41 to boost its intake amid a shortage.
The increase, backdated to February 1, looks set to trigger a battle for raw milk with other processors like Brookside expected to follow suit in line with previous trends.
At Sh41, New KCC is now the highest paying processor for raw milk with rival firms offering between Sh35 and Sh38 per litre. Ultimately the shelf price of processed milk is expected to go up.
“The volumes in the field have significantly dropped and we are paying farmers Sh41 to boost the supplies,” said Nixon Sigey, the managing director New KCC.
He added that the firm had seen milk supply from farmers drop by 20 per cent over the past month due to the current dry spell.
Brookside, which had earlier increased raw milk prices to Sh38 from Sh35 a kilogramme, triggering a price war said Tuesday that it was studying the market trends. It did not rule out a price increase.
“We have been the highest paying processor in the past few months and we are reviewing the market on each passing day,” said John Gethi, Brookside’s general manager in charge of milk procurement and extension services.
Brookside, which commands a 44 per cent market share compared to New KCC’s 20 per cent has in recent months set the market trends with its review of farm gate prices.
Kenya Dairy Farmers Federation chief executive David Bett said the fight for raw milk among the processors had already intensified with firms holding town meetings to woo farmers to their plants.
“Judging by the meetings that several processors are holding with milk cooperatives in major producing zones, it is evident that the battle for the commodity has started,” said Mr Bett.
Brookside, for instance, has started a farmer recruitment drive aimed at bringing on board more than 10,000 new raw milk suppliers.
The costly farm gate prices have increased retail milk prices with the half litre pouch now retailing at Sh47, up from Sh45—the first rise in 13 months.
“The market has reacted within the realms of the supply and demand curve, by witnessing an upshot in retail prices of processed milk,” said Mr Gethi.