Yet Kenya now faces a severe shortage that has seen prices go through the roof.
The question is how the milk, which was stored in the strategic food reserves has failed to stem the crisis just a few months down the line.
On Friday, National Treasury Cabinet Secretary Henry Rotich, through a special gazette notice, allowed the importation of 9,000 tonnes of duty-free powdered milk to ease the shortage -- and that is currently the Government’s reactionary measure on all the food products facing shortfalls.
Importers were also recently allowed to import maize and sugar duty free.
“It is notified for the general information of the public that in accordance with section 114 (2) of the East African Community Customs Management Act, 2004 and as a declaration by the President that the drought and famine in parts of Kenya is a national disaster...duty shall not be payable for the importation of 9,000 tonnes of milk by milk processors with the authority of the Kenya Dairy Board,” said the CS.
The price of Kenya’s processed milk, at an average of Sh140 per litre, is one of the most expensive in Africa, second only to South Africa, according to a survey released early this month by the Expatistan Cost of Living Index.
Within East Africa, a litre of milk costs Sh85 in Uganda and Sh130 in Tanzania. Ironically, Kenya is a leading producer of milk in Africa, with an annual output of 5.2 billion litres - which translates to 120 litres per person - ideally enough for the population.
However, just 30 per cent of all the production is processed before sale as farmers avoid the poor prices offered by processors and lengthy payment schedules, creating an easily distortable supply of processed milk.
Last month, Agriculture Cabinet Secretary Willy Bett assured Kenyans that processors have enough milk powder that was supposed to last the country to this month when the prices were expected to go down because of increased supply as a result of the rains.
At that time, the price of a 500ml packet of long-life milk was Sh55 from Sh50 in March while fresh milk cost Sh48 from Sh43. By yesterday, the prices had jumped to Sh70 for long-life milk and Sh65 for whole milk, raising questions on who is benefiting from the shortfall.
Processors say the hike in prices is a result of diminishing supply due to the prolonged drought since they have been forced to increase their farm gate prices to cushion farmers as the cost of production rises.
“These are forces of supply and demand. We have been forced to cushion the farmers by increasing the purchase price from Sh32 to Sh43, which is the highest ever,” Nixon Sigei, the managing director of Kenya Cooperative Creameries (KCC), told Weekend Business.
“But you realise unlike other years, say 2015, consumers have not gone to the supermarket and been asked to pick only two packets, so things are not as bad,” he said.
In March, Brookside Dairy also announced a 25 per cent increase on producer prices to Sh42 in what was seen as a competition for raw milk that had been sparked by its rival KCC.
Brookside Director of Milk Procurement John Gethi said the new rate was a bonus to farmers to cushion them from the effects of prolonged dry weather.
“The current business environment has pushed up the shelf prices of our products. We have decided to pass on the benefits of these increases to our farmers during this exceptionally dry period,” he said.
Farmers, however, say the money they get from processors can barely meet the cost of production.
“More than two thirds of the farmers who were selling their milk to processors have switched to the open market in search of better prices,” says Kenya Dairy Farmers Federation chairman Richard Tuwei.
If you consider that only 30 per cent of the milk produced is sold to processors and more farmers are opting to the open market, then the answer on why the prices are high is partly answered.
There are no updated statistics on the number of smallholder dairy farmers but they are estimated to be more than two million, with more than five million animals.
According to Egerton University’s Tegemeo Institute of Agricultural Policy and Development, it costs an average of Sh20 for a farmer to produce a litre of milk.
“In terms of direct variable costs, zero grazers spend an average of Sh19 to produce a litre of milk, while the semi-zero grazers spend Sh17.2 and the open grazers, Sh10. Consequently, gross margins are highest for open grazers at Sh22.8 and lowest for zero grazers at Sh12.4 per litre,” says the institution in a circular on the cost of production of milk versus returns.
On the other hand, the processors make up to three times what farmers get.
Githunguri Dairy Co-operative, for example, has an annual turnover of more than Sh3 billion despite its milk being the cheapest in the market.
So lucrative is Kenya’s milk processing industry that Africa’s richest man, Nigerian Aliko Dangote, is currently setting up a powder milk plant in Kilifi.
The ripple effects of this war for raw milk has resulted in soaring prices on the shelves despite the claim by government that there is enough powdered milk to keep the cost stable.
