Business Daily (Nairobi)
Zeddy Sambu
13 January 2008
Nairobi — Milk processor New Kenya Co-operative Creameries (KCC) has reopened the eight factories it had closed following the outbreak of violence.
Mr Francis Mwangi, the managing director, said supply of milk had resumed at Eldoret, Sotik, Kapsabet, Lessos, Eldama Ravine, Kilgoris, Iten and Ainabkoi plants.
"During the 10 days we closed, deliveries had stopped as transporters and farmers feared for their security," he said.
The company which controls 40 per cent of the domestic milk market said it has lost Sh40 million due to the supply disruption that occurred in the wake of the chaos that followed the disputed outcome of the presidential election.
Mr Mwangi said the firm was facing a possible drop in its milk intake during the dry months of January and February. This signals a possible rise in both producer and retail prices during the same period.
"We have lost nearly two million litres of milk that we buy at a price of Sh20 per litre," Mr Mwangi said.
Mr Bhaskar Rajamani, a director at Spin Knit Dairies, said the shift from unprocessed milk to pasteurised milk had contributed to the overall growth of the processed milk sector. He said the company had stocked huge amounts of UHT products in readiness for the dry season. Part of this stock is earmarked for the export market.
New KCC said it was using its milk drying machines in Kitale, Nanyuki and Eldoret factories to process powdered milk in readiness for the dry season.
This year, demand for milk is expected to stand at 2.6 billion litres compared to last year's figure of 2.1 billion litres. Mr Mwangi said this rise in demand required a significant increase in production, processing and efficient marketing chain.
Fresh and long-life milk and dairy products are mainly used to make tea and coffee. Consumption of fermented milk products such as yoghurt and Mala has also been rising as awareness on the benefits of milk consumption improved.
Dairy sector data show that Kenya became a net exporter of dairy product in the past two years with deep roots in African and Middle East markets.
"We are still receiving enquiries from potential markets and we hope to satisfy them by next June," Mr Mwangi said. Having realised 37 per cent growth last year, the dairy sector has emerged as one of the top performers in the agriculture sector.
Higher producer prices and prompt payments, extension services to farmers, have inspired increased milk production at farm level, heightening competition among processors.
Over the past five years, producer prices have risen from Sh8 per litre in 2003 to more than Sh20 at the end of last year, leading to increased investments in the sector.
Joseph Ngera, a Nakuru-based dairy farmer said 3.6 billion litres of milk were produced last year with volumes expected to hit 4 billion by June.
Kenya Dairy Board (KDB), the sector regulator, said it expects a review of producer prices to Sh24 promising better earnings for farmers.
Increase in producer prices is a step in the right direction because the current payments are below the production costs. It is estimated that it costs Sh25 to produce a litre of milk.
Poor state of roads in major milk production areas continues to affect milk collection and cooling efficiency, thereby increasing post-harvest losses to farmers.
In the current Budget, Government announced improved business in the dairy industry by zero-rating of fresh milk products.
Treasury also announced a zero tariff on duty and VAT on all imported dairy equipment.
"Products like lala, yoghurt, butter, ghee and fermented milk continue to attract 16 per cent Value Added Tax (VAT) and the Government should explore the possibility of reducing the VAT on these products to 0 per cent," said the Spin Knit Dairy official.
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