The producer price of milk has risen by up to Sh42 per litre from Sh33 previously as farmers gain from the current shortage of the commodity.The producer price of milk has risen by up to Sh42 per litre from Sh33 previously as farmers gain from the current shortage of the commodity. FILE PHOTO | NMG
The producer price of milk has risen by up to Sh42 per litre from Sh33 previously as farmers gain from the current shortage of the commodity.
This is the highest price that dairy farmers have earned since the beginning of the year, coming as a reprieve at a time when they are grappling with increased cost of animal feeds.
The price rise is due to the forces of demand and supply as processors jostle for the limited avail-able volumes of milk.
“The price has gone up because of the market forces caused by low volumes in the market,” said Nixon Sigey, managing director New Kenya Cooperative Creameries.
Mr Sigey, who is also the chair of the Kenya Dairy Producers Association, said the intake to the factories has dropped by 40 per cent.
The decline implies that most processors are operating below their installed capacity.
Brookside will pay 17 per cent more for a litre of raw milk, which pushes the cost to about Sh40 for a chilled commodity delivered at the firm in Ruiru.
John Gethi, Brookside’s director of milk procurement, said the price review had been necessitated by a change in the prevailing market conditions in the dairy value chain.
Kenya Dairy Board last week announced that the volumes had dipped from 60 million litres in January to 43 million litres in June.
The rise in producer price signals high cost for consumers as processors will have to recover the higher cost through the retail market.
However, Mr Sigey allayed fears of price increment saying processors are reconstituting powder into fresh milk and that it will go a long way in stabilising shelf prices. Consumer prices have been relatively stable since the beginning of the year with a half-litre packet retailing at an aver-age Sh50 despite a significant rise in farm gate price from a low of Sh25 to Sh33 in March.
Normal production is expected to pick up in October with the onset of the short rains.
At the same time, grain millers have scaled down on milling creating a shortage of the by-products for animal feeds manufacturers, pushing up the price of the key supplements and setting stage for higher cost to farmers.
Maize and wheat millers have cut down on processing because of unmoving stocks of maize flour on the shelf that has left them stuck with huge quantities of unsold products.
Article was first published on the Business Daily