Milk processors are holding high-value stocks of the commodity worth over a billion shillings following intense competition in the export market.
Chief Administrative Secretary in the Ministry of Agriculture Andrew Tuimur said for instance, the New Kenya Cooperative Creameries (New KCC) cannot sell off Sh1 billion powdered milk as their price is higher compared the external markets.
He blamed higher cost of production for the processors’ predicament.
“Processors are stuck with the long life dairy products that they cannot sell to their target market because they cannot compete favourably due to the high cost,” said Dr Tuimur.
He said the Middle-East market, where processors sell most of their long life products, is now sourcing the same from other countries offering lower prices.
Kenya’s cost of production per litre is over Sh20 compared with other regional countries such as Uganda where a farmer incurs about Sh12 for the same quantity, which has made it difficult for local dairy products to penetrate neighbouring country.
Dr Tuimur said animal feeds form the biggest component of the cost of production and that the government was trying to address the issue to make dairy farming competitive.
The value of dairy product is expected to go down in the coming days following a steep increase in production that has been projected to result in a surplus of 105 million litres between July and December this year.
The department of livestock is already seeking Sh2 billion from the Treasury for mopping up the excess milk in the market. The funds will be used in converting surplus milk into long-term products.