Processors have cut the price of raw milk by Sh3 a litre as the market responds to a steep rise in production but retail prices remain unchanged.
The move has upset farmers currently grappling with high cost of production resulting from increased cost of feeds, with some expected to earn as low as Sh26 per litre of milk from an average of Sh38 earned before the review.
The co-operatives where farmers are attached to normally deduct about Sh4 per litre from farmers as administrative fee and transport cost usually charged by the processors.
“Dear supplier, due to market forces beyond our control, raw milk prices have been reviewed downwards by Sh3 per kilogramme from January 21,” reads one of the text messages sent to farmers.
The Kenya Dairy Board (KDB), the sector regulator, says milk production has steeply increased since November last year, prompting processors to review the price downwards.
“There has been an increase in volumes of milk coming in from farmers and this is what has forced processors to adjust the price. It is a case of supply and demand,” said Margret Kibogy, KDB managing director.
Ms Kibogy said the two main firms — Brookside and New KCC — are now processing an average of 1.2 million litres of milk daily from 800,000 litres around November last year.
The price of 500m long life milk is on average still retailing at Sh50 for all the brands while the ones in pouch, for the same quantity, is selling at Sh45 in most retail shops.
Farmers have protested the cut arguing that low prices in the wake of high cost of feeds will keep them out of business.
“This news has come as a shocker to farmers especially at this time when we are grappling with high cost of animal feeds,” says Stanley Ng’ombe, chairman of the Kenya Dairy Farmers Federation.
Mr Ng’ombe says production cost per litre of milk is Sh22.75 adding that the current price makes it hard for farmers to break even.
However, the board puts the cost of production at Sh19 per litre for zero grazing, Sh17 for semi-zero grazing and Sh10 for the open field grazing.
This is the first time in two years that processors have cut the price by a huge margin, after it remained constant for the whole of last year.
The Business Daily was unable to get any response from the processors as phone calls and email sent went unanswered.