Top processors in the country are stuck with Sh4 billion stocks of long life milk products as increased supplies force them to convert the commodity to powder, butter and UHT.
Agriculture Cabinet Secretary Willy Bett said the government has so far offloaded stocks worth Sh300 million from the processors under the Strategic Food Reserve scheme.
New Kenya Cooperative Creameries (New KCC) and Brookside are grappling with increased volumes of milk from farmers as favourable weather that started last November significantly raised production.
“Processors are currently holding huge volumes of long life products estimated at Sh4 billion. This is resulting from increased milk intake from farmers,” said Mr Bett.
He said the huge stocks were impacting negatively on the financial flow of the processors, adding that the government was scouting for external markets to help factories offload products.
The CS, however, said local milk products cannot sell competitively in the export market as they are expensive.
“Our products are some of the most expensive in the region and they cannot compete with other commodities in the export market,” he said.
According to the Kenya Dairy Processors Association, cheap milk in neighbouring countries has denied local processors market. The association’s chairman, Nixon Sigey, said the high cost of production in Kenya is making the country’s milk uncompetitive in the export market.
“Our products are unable to compete with those from countries such as Tanzania and Uganda because the commodities are very cheap there,” said Mr Sigey.
A study by Egerton University based Tegemeo Institute put the average cost of milk production in Kenya at Sh16 per litre while another study by the International Livestock Research Institute (ILRI) put the cost at Sh18.
In Uganda, a farmer incurs Sh10 to produce a litre of milk.
A recent report by the Expatistan research body shows that milk prices in South Africa are cheaper compared to Nairobi with a litre of milk going at Sh80 in Durban, Sh84 in Johannesburg and Sh83 in Cape Town while the same goes for Sh103 in Nairobi.
Local milk processors have been expanding their facilities to manufacture long life products and tap the regional market. Brookside Dairy installed a milk drying plant in 2014, expanding its capacity for the intake of raw milk.
Milk supply to local processors has been rising since September last year as the favourable weather created by El Nino rains spurred production.