Processor anticipates further reduction, but warns it may cut farmers’ earnings.
State-owned milk processor New KCC has cut the retail price of milk by Sh10 a litre with more reductions expected in the coming days as influx of cheap commodity from Uganda and increased local supply is projected to depress the cost.
A litre of long life milk is now retailing at Sh117 from Sh127 with half litre packet going at Sh45 from Sh50 previously. Other brands such as Taifa are selling at Sh40.
The firm’s managing director Nixon Sigey said the move had been nessecitated by high volumes of the commodity in the market and a decline in producers’ price.
“We are passing the benefits to consumers as currently we are getting more milk from farmers. There is also a likelihood of a further decline in future resulting from stiff competition that processors are facing from cheap Ugandan milk,” said Mr Sigey.
He, however, warned that a further reduction will hurt farmers as the producer prices will also be decreased to be in tandem with consumer prices.
This is the second time in a span of two months that the consumer prices have been slashed in response to increased supply.
Processors have had to compete with Lato milk from Uganda, which is retailing at Sh40 for a half litre packet. This brand has dominated western Kenya and is also retailing in some shops in Nairobi.
Producer prices have fallen by about 33 percent in the last one year on the account of an increase in production.
A litre of milk is on average going at Sh20 across the processors from a high of Sh37 at the same time last year.
New KCC is paying Sh26 per litre to co-operative societies that supply it with milk. However, with a charge of Sh1 for chilling and Sh2 for transport, and after other deductions (mainly service charge by co-operatives) farmers end up with about Sh20.
According to Kenya Dairy Board, the country’s monthly milk requirement is 50 million litres but the sector has been witnessing in excess of over 65 million litres every month since July.
The government has been looking at ways of mopping up the excess milk and preserving it for future use, which will also help regulate prices when there is a shortage.
Agriculture CS Mwangi Kiunjuri told Parliament last week that a proposal has been submitted to the Strategic Food Reserve (SFR) board to top up the milk component of the SFR by Sh1 billion to Sh2 billion.
This will facilitate milk processors to collect and process excess milk into long life products that can then be sold to the market during periods of deficiency.
In the previous financial year, the government spent Sh1.5 billion to cater for conversion of surplus milk, done through the State owned New KCC.
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