Brookside price increase signals milk supply shortage

 

Milk on display at a supermarket. FILE  NATION MEDIA GROUP

By GEORGE NGIGI

In Summary

• Brookside Dairy has announced an increase in farm-gate prices to Sh35 from the previous level of Sh30.
• Milk retail prices were increased three weeks ago, with processors attributing it to drop in farm supplies.
• A half litre pouch is currently retailing between Sh41 and Sh45, up from Sh35.

Brookside Dairy has increased its purchase price for raw milk from farmers by Sh5, setting the ground for a price war with other processors in a bid to secure supplies during the low season.

The dairy announced an increase in farm-gate prices to Sh35 from the previous level of Sh30.

“More than 145,000 farmers contracted by the company will benefit from the price adjustment which is back dated to July 18,2013,” said company general manager for milk procurement and extension services John Gethi.

New KCC, which is Brookside’s major competitor, said it was going to wait for the company to effect the changes before responding.

“We are going to react after they have effected theirs to see if we are at par.

Last year they announced Sh40 but it was not for all farmers so we don’t know how it is going to be effected,” said Kipkirui Langat, CEO of New KCC.

Milk retail prices were increased three weeks ago, with processors attributing it to drop in farm supplies.

A half litre pouch is currently retailing between Sh41 and Sh45, up from Sh35.

“They should not exploit the consumer by increasing the retail price of half litre by Sh10 and adding the farmer Sh5 for a litre,” said Dairy Traders Association secretary general John Wachira.

He said the increments usually affect the bulk suppliers, most of whom are brokers who consolidate supply from small farmers by paying them cash for their deliveries.

Suppliers of raw milk have increased competition with processors by introducing milk dispensers in supermarkets. A litre at the dispensers is retailing at Sh60.

Milk farmers who have invested in modern technology allowing them to sustain their current levels of production are expected to be the greatest beneficiaries as processors scrum for all that is available in the market.

“Farmers are the direct beneficiaries. It is us (processors) who are competing. First guy makes the move then you respond,” said Mr Langat.

It is estimated that 90 to 92 per cent of Kenya’s dairy farming is done by small-scale farmers who rely on rain-fed agriculture.

The volatility in the milk industry has seen World Bank decide to invest in a Sh6.5 billion centre of excellence to boost dairy productivity among smallholder farmers.