Commodities

Milk retail price goes up as supply crunch bites

milk (1)

Consumers will pay more for milk starting this week following a decision by New KCC to adjust upwards the price of some of its products. FILE PHOTO | NMG

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Summary

  • In the latest review, a half-litre packet of milk in a pouch package will now cost Sh46 from Sh43 previously, marking the first major rise in cost since 2018 and setting stage for other processors to follow suit.
  • The high cost has been precipitated by a sharp decline in supply, leading to rise in producer prices with the additional cost now passed to consumers.

Consumers will pay more for milk starting this week following a decision by New KCC to adjust upwards the price of some of its products, as the processor responds to declining volumes and higher payment to farmers.

In the latest review, a half-litre packet of milk in a pouch package will now cost Sh46 from Sh43 previously, marking the first major rise in cost since 2018 and setting stage for other processors to follow suit.

The high cost has been precipitated by a sharp decline in supply, leading to rise in producer prices with the additional cost now passed to consumers.

“There has been a shortage in supply of milk, and this is the reason why the producer prices have gone up of late,” said Livestock Principal secretary Harry Kimtai. “Regarding the consumer price of milk, this is determined by the forces of demand and supply,” he added.

Processors increased the producer price by about Sh20 following a decline in supply.

For instance, Brookside is paying 17 percent more for a litre of raw milk, which pushed the cost to about Sh40 for chilled commodity delivered to the firm in Ruiru. New KCC increased its price by nearly the same margin.

Kenya Dairy Board said volumes dipped from 60 million litres in January to 43 million litres in June.

The shortage has seen milk deliveries to processors drop by 40 percent forcing the factories to grapple with low supplies.

The regulator had projected an increase in production starting October with the onset of short rains.

However, the weatherman has announced that there will be depressed rainfall during this period, implying that the supplies are likely to remain low for some time.