Milk prices at farms drop as supply grows

The farmgate price of milk has dropped following improved supply in the market, signalling reduced earnings for producers.

Brookside Dairy is the first processor to cut raw milk prices but New KCC said on Friday it had no such plans.

Brookside which has been offering farmers Sh40 per litre started paying farmers Sh35 from March 1, attributing the change to the new business environment. Unseasonal rains have improved animal forage supply in the normally dry period.

“The supply is currently high in the market, normally at this time of the year we do not expect the amount of volumes that we are getting now,” said the company general manager in charge of milk procurement and extension services John Gethi.

The price of 500ml on pouch has gone down by Sh4 across all the brands in retail chains, to sell at Sh41 from the initial Sh45. Mr Gethi said the move was also targeted at increasing consumption of processed milk at the household level.

READ: Farmers want dairy board to set prices of raw milk

At Sh35 per litre, he notes farmers will still enjoy relatively high price that will cushion them against increased cost of production. The cost of production went up in September following the enactment of the Value Added Tax Act 2013 that imposed a 16 per cent levy on animal feeds.

“Farmers should be happy that even with the current high supply, we can manage to pay them good prices as compared to last year’s Sh30,” he said.

The Sh40 the processors have been paying suppliers is the highest ever in the dairy industry and it has been effective in the last seven months.

However, New KCC said they are still maintaining the current price they have been paying farmers even as they monitor the situation.