By Frankline Sunday
Nairobi,Kenya:High cost of feeds and transport have scaled up production costs among major milk processors
Kenyans may have to wait longer for a reduction in milk prices.
This is despite an increase in rainfall in most parts of the country over the last five months. According to processors, milk production costs have risen significantly.
They say even good rains will not guarantee a fall in prices in the short-term. Currently, milk retails at between Sh38-45 per half litre packet depending on the brand.
“There has been an increase in production in most areas because of favourable rains but it will be difficult to see this translated into lower milk prices for consumers,” explained Ms Helen Too, the marketing manager of Tetra Pak Ltd, a packaging and processing firm in Nairobi.
“This is because the cost of producing milk in the country has gone up in the last few years and unfortunately these additional costs have to be factored into the final shelf price of milk products.”
Poor road network
Too cites transport as a major hindrance for both dairy farmers and processors. It takes up the bulk of costs. “Most of the dairy keepers in Kenya are small-scale farmers with few cows. They produce as little as three litres per day. Dispatching trucks to go to every farmer to pick their produce becomes expensive in the long run,” she says
This has been worsened by poor road network in rural areas and high fuel prices. According to Egerton University’s Tegemeo Institute of Agricultural Policy and development, the dairy industry is the largest agricultural sub-sector in the country, eclipsing even tea production.
The sector is said to contribute 14 per cent of agricultural GDP and 3.5 per cent of total GDP. However, over 70 per cent of the production is by small-scale producers.
The economies of scale make the production process more expensive with support to farmers and providing technology transfer being difficult to achieve. Farmers in the sector rely on rain fed agriculture for animal feeds which exposes them to weather shocks often leading to gluts and shortages. In 2008 and 2010, farmers lost millions of shillings in a milk glut that saw thousands of liters of milk poured on streets in protest.
The reverse happens when there is a drought, which results is scarcity in the commodity and eventual high prices for the consumers.
According to the recently released Kenya Economic Survey 2013 report, delayed rains in the first part of last year is to blame for a 54 million litre drop in milk supplied to processors in the country. This translates to around Sh1.3 billion in losses to the sector at Sh25 per kilo of raw milk.
Unsustainable costs
Robert Njiiru who owns a zero grazing unit in Githunguri says the cost of inputs has increased over the last two years, eating into their final proceeds. “The prices of concentrates such as dairy meal, maize germ and bran have traditionally been expensive and out of reach for small-scale farmers,” he says.
“We have even witnessed an increase in prices in some brands and given the large quantities that are required by the animals, the costs are becoming unsustainable.”
The Dairy Traders Association recently called on the Government to address the costs of processed feeds with the possibility of providing subsidies similar to those enjoyed by farmers in other sectors.
This, they said, would bring down the overall cost of milk production and consumer prices.
The cost of milk production per kilo is said to be between 10 to 15 times more expensive in Kenya than in Uganda, which has a smaller industry and less advanced dairy farming technologies.
