Milk prices go up amid supply fall

Consumers will start paying more for milk starting this week following a decision by New KCC to adjust upwards the price of some of their products.

File | Nation Media Group

By  Gerald Andae

Business Reporter

Nation Media Group

What you need to know:

• In the latest review, a half-litre packet of milk will now cost Sh46 from Sh43 previously.
• This marks the first major rise in cost since 2018 and sets stage for other processors to follow suit.
• The shortage has seen milk deliveries to processors drop by 40 per cent.

Consumers will start paying more for milk starting this week following a decision by New KCC to adjust upwards the price of some of their products, as the processor responds to declining volumes and higher payment to farmers.

In the latest review, a half-litre packet of milk will now cost Sh46 from Sh43 previously, marking the first major rise in cost since 2018 and setting stage for other processors to follow suit.

The high cost has been precipitated by a sharp decline in supply, leading to a spark in producer prices with then additional cost having to be passed to consumers.

"There has been a shortage in supply of milk, and this is the reason why the producer prices have gone up of late," said Livestock Principal Secretary Harry Kimutai.

"Regarding the consumer price of milk, this is determined by the forces of demand and supply," he added. Processors increased producer price of raw milk by about Sh20 following a decline in supply in the last couple of months.

Deliveries drop

For instance, Brookside is paying 17 per cent more for a litre of raw milk, which pushed the cost to about Sh40 for the chilled commodity delivered to the firm in Ruiru. At the same time, New KCC increased its price by nearly the same margin. Kenya Dairy Board said the volumes had dipped from 60 million litres in January to 43 million litres in June.

The shortage has seen milk deliveries to processors drop by 40 per cent forcing factories to grapple with low supplies.

The regulator had projected an increase in production starting October with the onset of short rains. However, the weatherman announced that there would be depressed rainfall during this period, implying that the supplies are likely to remain low for some time.

Mr Kimutai said the drop in volumes was occasioned by Covid-19, which curtailed supply of key components such as feed supplements and the outbreak of foot and mouth disease in some parts of the country.

Kenya normally relies on other countries for cotton and sunflower cakes, which are the major components in processing of animal feeds.

gandae@ke.nationmedia.com