Raw milk price falls further as supply rises

The farm gate price of milk has dropped further following improved supply in the market, pointing to reduced earnings for producers.

Brookside Dairy has notified farmers through short text messages that from next Tuesday it will buy raw milk at Sh30 per litre from the current Sh35 and Sh40 in February.

Its top rival New KCC last week lowered the price by Sh5 to purchase at Sh35 in tandem with Brookside, which is the market leader with a 44 per cent stake of Kenya’s processed milk market.

New KCC commands 20.8 per cent of the market.

“Dear supplier, due to prevailing market conditions, raw milk prices have been reviewed downwards by Sh5 per kilogramme effective April 1, 2014,” read Brookside message.

The rains have improved animal forage, prompting a rise in milk production which the producer hope will cushion farmers’ earnings following the cut on farm gate prices.

The processors did not mention plans to cut retail price of processed milk, which has remained at Sh45 for a 500ml packet in top retail outlets like Uchumi Supermarket and Tuskys.

“Despite the price reduction, Brookside will continue to buy all the agreed volumes of milk that our farmers committed to supply to us,” said the firm’s general manager milk procurement and extension services John Gethi.

The Sh40 the processors had been paying suppliers for the better part of last year was the highest ever in the dairy industry, which is yet to hit the 2011 peak production levels.

Official data show the milk intake by the processors grew 4.9 per cent to 519.6 million litres last year. In 2011, the processors dealt in 549 litres of milk.
Brookside has an installed capacity of 1.15 million litres, making it the largest processor in the market.

The price cuts have triggered protests from farmers, who are mulling investing in milk dispensers through their cooperative societies.

READ: Milk prices at farms drop as supply grows

Kenya Dairy Farmers Federation, which serves 150,000 farmers from a number of cooperatives, say the price cuts are not necessary at a time when milk volumes are going down.

The federation did not provide the volumes while the Kenya National Bureau of Statistics is yet to release this year’s milk production figures.

“This is exploitation to farmers who are already grappling with the high cost of production,” Richard Tuwei, the chair of the federation told the Business Daily in an interview on Monday.

He said the price of animals feeds went up by 16 per cent following the enactment of the VAT Act 2013, noting that at the price of Sh30 per kilogramme of milk, farmers will be making losses.

A 70 kilogramme bag of the standard dairy meal which was selling at Sh1,900 is currently retailing at Sh2,300 since the new law took effect.

Mr Tuwei reckons that farmers are looking to buy dispensers, commonly referred to as milk ATMs, to sell some of the produce directly to retailers.

“We significantly want to cut the number of volumes that we supply to processors,” he said.