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Dairy firms reduce milk prices by Sh10

Dairy processors have reduced milk prices by Sh10 for a half-litre packet following a slight increase in supplies coupled with importation of duty-free milk powder.

Brookside Dairy and New Kenya Co-operative Creameries (New KCC) announced fresh milk consumer price cuts starting from Monday as a result of improved raw milk intakes.

“The forces driving market correction have commenced, with a major change being the improved supplies from farmers” said Mr John Gethi, Brookside Dairy’s director of milk procurement, in a statement.

“We will continue to observe the motions in the market and react accordingly. “Eventually, the markets are expected to reach an equilibrium level.”

GOVT INTERVENTION

The statement added that the decision was further informed by the national government’s intervention, through a gazette notice, allowing importation of duty-free milk powder to help bridge the raw milk shortage.

Two weeks ago, National Treasury Cabinet Secretary Henry Rotich removed duty on powder milk to allow importation of 9,000 tonnes of the product in a bid to ease shortage.

The volume of milk collected by processors fell by 36 per cent from 56.44 million litres last October to 36.11 million litres in February.

Milk prices had shot to an all-time high of Sh65 for a half-litre packet following prolonged drought, from December 2016 to May 2017, the longest dry spell experienced in Kenya in the recent past.

“The season caused scarcity of the product at the farm level, resulting in a drastic drop by over 50 per cent of raw milk being supplied to the company’s milk collection facilities,” said the KCC statement.

HISTORIC HIGH

“This affected the producer price, pushing it up from Sh30 to a historic high of Sh43 a litre, which in turn impacted consumer prices to rise to more than Sh60 per 500ml pack of fresh milk.”

According to New KCC managing director Nixon Sigey, the price drop was effected Monday in the general trade and takes effect on June 1 in supermarkets.

The processor has seen a 20 per cent increase in milk supply as a result of the onset of rainfall in the major milk-producing areas.

Brookside registered a 30 per cent increase in raw milk supplies, attributing this to the increased producer prices of Sh42 a litre, as it sought to cushion farmers from the effects of the countrywide drought.

“Shelf prices cannot remain at the current levels forever,”said Mr Gethi. “There will be further changes in the market dynamics as the supply environment continues to improve as a result of the current rains being witnessed in many parts of the country.”

The drop means that the price of a half-litre packet of Ilara will reduce to Sh55 from Sh65, Tuzo Fresh to Sh52 from Sh62 and Molo Fresh to Sh50 from Sh60 with KCC Fresh selling at Sh50, down from Sh60.