Reports from leading milk processors say that milk prices are set for further declines in the coming months if the rains are sustained. Brookside and New KCC on Tuesday slashed the retail price for a 500 milliliter packet by Sh10, citing increased supply of raw milk.
“If this (rainy) trend is sustained prices should be coming down in the next two months,” New KCC managing director Nixon Sigey said yesterday in a telephone interview.
The processors expect prices will get to about Sh45 for half a litre pack – the levels they were before a biting drought from the last quarter of 2016 more than halved supply of raw milk.
The price of a 500ml packet of fresh milk hit record highs last month after crossing the Sh60 mark in major supermarkets from an average Sh45 in January, costing as much as Sh70 in most shops.
The increase in milk prices was largely because of a drop in output as a result of a prolonged drought which led to a slowdown in dairy feeds, which are largely dependent on rainfall.
The Kenya National Bureau of Statistics data shows that milk intake in the formal sector declined by 23.36 per cent in the first two months of the year to 84 million litres from 109.6 million litres in the same period of last year.
Brookside Dairy, which controls more than 44 per cent of the raw milk market, said intakes had shot up by 30 per cent since the processor began paying farmers Sh42 per litre of milk delivered.
“The growth of intakes is attributed to the improved prices we offered farmers last month, while recent rains in different parts of the country will have a further positive impact on production,” Gethi said.
New KCC, on the other hand, increased producer prices to Sh43 per litre and has reported a 20 per cent increase in supply.
“Despite the drop in retail prices, we want to encourage farmers that producer prices will remain competitive until the market has fully recovered,” Sigey said.
The two processors are currently retailing a half- litre packet between Sh50 and Sh55.