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Milk traders plan own factories as retail prices rise

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A 16 per cent VAT will push the cost of processed milk up by Sh7. Photo/File

Raw milk traders are planning to set up two processing factories to enable them gain from higher retail prices occasioned by the new Value Added Tax (VAT) law.

Dairy Traders Association national secretary John Wachira said the association was mobilising resources from farmers, suppliers and other partners to set up two factories in Naivasha and Embu.

The government imposed a 16 per cent VAT on goods with effect from Monday, pushing the cost of processed milk up by Sh7.

But traders say they have nothing to gain from the higher retail prices as processors are buying the commodity from the farms at as low as Sh20 a litre and selling it at Sh52 for half-litre packet.

“There is nothing the farmers will gain from the introduction of VAT on milk unless the processors consider to increase their rates which is unlikely. Some are buying from us for as little as Sh20 per litre and sells it for even Sh90. That is so unfair,” said Mr Wachira.

The change in the market chain, Mr Wachira said, could enable to farmers determine retail prices.

“The monopoly in the milk industry is a negative factor to the farmers’ productivity. The main agents keep commanding the prices to the detriment of the farmers. Being able to add value to  the milk we deliver ourselves will be a great boost as we will earn profits that we haven’t so far gotten in years,” said Mr Wachira.

Milk production in Kenya relies heavily on good rains, a factor that contributes to acute shortages in dry seasons, causing price swings.

Figures from the Kenya Bureau of Statistics indicate that 90 to 92 per cent of milk is produced by the small-scale farmers who depend on the rain-fed agriculture.

But Mr Wachira said the association is sensitising the dairy farmers to diversity into commercial dairy farming so as to maintain a consistent supply of milk.

“At the moment, we are carrying out sensitisation drives in all the regions across the country to educate the farmers on the need of engaging in commercial dairy farming. Rain-fed agriculture is not profitable and is very unreliable,” said Mr Wachira.

With the increase in cow milk prices, consumers are expected to seek alternatives like goat milk. However, supply of goat milk has been low due to few consumers.

Mr Wachira says the market for goat milk is there.

“The demand for goat milk is so high in places like Kenyatta National Hospital, but the supply is low because we are unable to collect enough milk from the farmers scattered all over,” he said.

“Before, we encourage more farmers to rear dairy goats we must be able to find a reliable market which is not easy as many consumers are unwilling to try the milk.” Cultural values and beliefs have hindered many from consuming goat milk.

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