East Africa is becoming a frontier market for milk exports from Europe, which poses a threat to the region. Milk exports from the EU account for a significant proportion of the value of agricultural output, which is about 15 per cent.
The EU's leading milk producers are Germany (19 per cent), France (16 per cent), Poland (7.9 per cent), Netherlands (7.8 per cent) and Italy (7.4 per cent), which together with the UK (9 per cent), account for almost 70 per cent of the bloc's production. Across EU, there are more than 5,000 processors of dairy products for the EU market and exports to other regions.
EU exports account for a large chunk of the West African market, especially for milk powders.
The bloc is now looking to East Africa, for the surplus milk powder generated by a sharp increase in milk production amid flat consumption growth. European dairy processors particularly Nestlé and in have a presence in East Africa.
And like West Africa, where cheap EU milk distorts the markets, there are concerns in East Africa that the local producers could suffer the same fate. Nixon Sigey, the Kenya Dairy Processors Association chairman, fears that dumping of cheap imports will kill the sector, "because we cannot compete with the EU, where the cost of production is very low."
Analysts say EU is taking advantage of the low production in East Africa and the expected increase in per capita consumption.
Kenya stands produces 5.5 billion litres of milk annually while Tanzania and Uganda produce 2.2 billion litres and 2 billion litres, respectively.
Tanzania has one of the lowest per capita milk consumption rates at 47 litres per annum compared with 120 litres per annum in Kenya and 54 litres in Uganda.
The region's consumption is much lower compared with the 200 litres per annum recommended by the World Health Organisation. For the EU, finding new markets for milk and milk products is a matter of urgency.
"EU dairy firms have been exporting their surplus without limit and at very low prices. In fact, what they did was to buy milk from European producers at prices below their production costs, which is tantamount to dumping," said a report by Oxfam and SOS Faim.
According to data from the European Commission, Kenya is among the top five export destinations in Africa for EU milk destinations. Others are Nigeria, Ghana and South Africa.
While Kenya and other processors in the region have tried to penetrate the Tanzania market, they have largely failed due to a $0.1 per litre tariff imposed on milk and milk products in spite of the East Africa Common Market. The tariff has impacted exports to Tanzania.
While trade rivalry between Kenya and Tanzania is making it impossible for regional processors to access the wider EAC market, there are fears a deluge from the EU will have dire impact on the sector, particularly on farmers' earnings.