Milk battles escalate amid snag over imports, pricing

A milk cooling plant. Prices of unprocessed milk low yet consumer price remain high. [File, Standard]
Kenya has taken the war against cheap milk imported into the country to new heights following seizure of about 30 tonnes of milk powder from Uganda that police say was illegally imported.

The importation of milk powder has been the bane of milk farmers, majority of whom are languishing due to low prices paid for their produce on account of cheaper and readily available milk from neighbouring Uganda.

Last Thursday, officers from the DCI Anti-Counterfeit Unit based at Parklands, Nairobi, raided two warehouses belonging to one of the largest milk importers and distributors and carted away tonnes of milk powder under the brand name Lato.

One of the stores is based at Eastleigh’s Third Avenue where a container full of powder milk was impounded. More bags containing the milk branded Lato, were discovered from another of the importer’s warehouse in Embakasi.

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Ugandan milk

Importation documents handed over to the police by representatives of the importer revealed that the milk originated from Uganda.

The documents showed the first of 10 lorries carrying the commodity was cleared at the Kenya-Uganda border on December 27.

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The milk cargo had been cleared by all agencies operating at the border point and whose authority is required to import goods.

The importers had also made Sh1 million payment to the accounts of KRA in Nairobi for duty. Officers based their arrest on a directive by the dairy board stopping importation of dairy products from Uganda. Ironically, the dairy board had okayed the same consignment for sale in the country and no charges have been preferred against the distributor.

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The crackdown is expected to spread to other parts of the country. DCI’s decision to impound the goods come just weeks after the Ministry of Trade imposed a 16 per cent value added tax (VAT) on milk imports from Uganda to protect local dairy farmers.

A glut in the market partly brought on by importation of milk powder and raw milk from Uganda has led to the drastic drop in milk prices and is pushing dairy farmers to the edge.

Milk processors’ appetite for cheap powdered milk is driving dairy farming to the ground. The result is broke farmers due to record low prices.

Farm gate prices have sunk to as low as Sh17 for a litre of milk, sparking a collective outcry from farmers. Yet the low prices have not provided a reprieve to consumers. The retail price of half a litre of packaged milk has plateaued at about Sh50.

At the centre of the gathering storm are revelations that Kenyan milk processors are importing powdered milk from Uganda and reconstituting it into long life milk at the expense of local dairy farmers. KDB staff were in Uganda to ascertain that it was not a conduit for unscrupulous traders to import milk from outside the East African Community into Kenya.

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To bring in the commodity from outside the EAC, importers are charging 60 per cent duty and seven per cent dairy levy.

At a farmers awards ceremony held in December by Brookside Dairies, Trade Cabinet Secretary Peter Munya raised the possibility traders could be importing powdered milk into Uganda at very low prices and thereafter reconstituting it into long life milk and selling it in Kenya.

To ascertain the truth of the source of the milk, he said, the ministry would go on a verification mission to Uganda.

Munya also said the ministry would apply the East Africa Community rules of origin to differentiate between goods produced within the EAC region and those that are not.

“If there (Uganda) is a conduit of importing milk to Kenya from a third country then that is illegal,” Munya said.

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Shortly after the visit to Uganda, the State Department of Trade recommended a 16 per cent levy on milk imports.

Heavy investments

According to Trade PS Chris Kiptoo, who led the delegation to Uganda, the country’s milk production has increased exponentially - from 70 million litres a year in 2018 to 112 million litres last year.

“We discovered that for the last seven years from 2014, Uganda has invested heavily in the dairy sector. This has seen them grow from a production of 24 million in 2016, to 71 million in 2017 and 112million in 2018,” said Dr Kiptoo.

The PS said the growth had seen the country surge its production from 100,000 litres per day in 2014 to the current one million litres per day when their production was only 48 per cent to capacity.

The sudden surge in the production coupled with low consumption has made milk exportation to Kenya lucrative.

According to the ministry of Trade, 18 per cent of the milk consumed in Kenya is imported from Uganda.

The Kenyan Economic Survey 2019 Report revealed milk was one of the agricultural products that increased Uganda’s imports to Kenya to Sh49.4 billion in 2018. Besides milk, animal feeds was also a significant import from Uganda.

It is instructive that Uganda’s production is still significantly lower than Kenya’s and with Livestock Principal Secretary Harry Kimutai admitting in Parliament that the Ministry could not ascertain that the milk was really coming in from Uganda, it is not improbable that processors could be importing cheaper milk to raise their profit margins.

Data from the dairy board shows that there is currently a surplus of 430 million litres of milk which has prompted the Strategic Food Reserve to request funding so that the New Kenya Cooperative Creameries (KCC) could buy the milk and convert it into powder for storage. Kenyans consume about 5.17 billion litres annually and the country is currently producing 5.6 billion litres, statistics presented to Parliament indicate.

The surplus notwithstanding, the country imports some 12 million litres of milk from Uganda each month, some of which is clandestinely reconstituted powdered milk.

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