New KCC to lower raw milk prices as supply increases

New KCC has initiated talks with dairy farmers to reduce farmgate prices following increased milk supply.

The State-owned milk processor says it is currently converting 100,000 litres of milk daily into long-life products to accommodate excess supply.

“We are holding huge stocks of powder milk and the long-life brands such as the Ultra Heat Treated (UHT) milk: this trend is not good for our business,” said Kipkirui Langat, the managing director.

Mr Langat said unless the raw milk prices are reviewed, New KCC may fail to meet its liabilities as it is finding it hard disposing of inventories.

“We are producing more of long-life products as opposed to those that are meant for immediate consumption, implying that we are making less sales at the moment,” he said.

Last week, Brookside Dairy became the first processor to reduce farm-gate prices from Sh40 to Sh35 after maintaining the initial price for seven months. Mr Langat did not give a specific date, but said it should happen soon.

“Our prices will be adjusted according to the contractual terms with our suppliers. We have to negotiate with them,” he said.

The New KCC boss who also chairs Kenya Dairy Processors Association said there might be a further decline in prices if the rains start this month.

However, he ruled out the possibility of a milk glut in the market, noting that the processors have increased capacity in recent years.

In 2010, overproduction in milk saw processors overwhelmed owing to low capacity, subjecting farmers to heavy losses.

The weatherman has indicated near normal or enhanced rain is expected mid this month, likely pushing up volumes of milk on farms as result of improved forage.

The price of 500ml on pouch package has gone down by Sh4 across for all brands in retail chains, to sell at Sh41 from the initial Sh45 for 500ml. Long-life variety on tetra package has fallen by an average of Sh2 to sell at Sh48.