The cost of production of milk has dropped by 20 per cent in the last five years but remains high at Sh23 per litre. Agriculture Cabinet Secretary Peter Munya said feeds and labour are the key drivers of costs.
He said the government is working with stakeholders to create ways of further reducing production costs so that farmers can earn more from their produce and have prices stabilised.
Speaking while launching a report by the Kenya Dairy Board (KDB) on the cost of production of milk in Nairobi, Mr Munya said the dairy industry is "very profitable". He urged investors to take advantage of local as well as new and emerging markets like Tanzania and the Democratic Republic of Congo (DRC).
A large market
He noted that DRC is soon joining the East Africa Community and has a large market for milk as the country currently gets the commodity from Europe, which is far away compared to Kenya.
The CS said the country's milk output has recorded impressive growth with annual yields rising by 12 per cent.
The country's milk output in 2019 was about 11 per cent of the 49.9 billion litres of milk produced in Africa, he noted. The industry employs 750,000 people directly, and creates 500,000 jobs indirectly in service provision.
Mr Munya said that following the recent visit by Tanzanian President Samia Hassan, Kenya has asked Tanzania to remove the veterinary fees of TSh2,000 per kilo (about Sh95) imposed on Kenyan milk exported to Dar es Salaam to ramp up exports .
He said when implemented, this will facilitate exports of our milk products, especially UHT milk, which was seriously affected by the introduction of the fees.
On the cost of milk production in Kenya, Mr Munya said the report has articulately captured current data on dairy farm dynamics, the cost of producing milk under different production systems and scales, the cost components, the trends between 2015 and 2020, and proposed several recommendations to manage the cost of milk production and improve productivity of milk per cow.
He said, from the findings of the study, dairy farming is profitable and on average, a dairy farmer in 2019 earned Sh12.20 per litre compared to Sh4.20 in 2014.
The profitability varied with the production system, highest for semi-zero grazers at Sh14.27 per litre, and lowest for zero grazers at Sh8.57 per litre.
The CS said average profitability per litre of milk produced rose to an average of Sh16.20 in 2019, when other farm revenues such as sale of livestock and manure were considered.
"This should excite and motivate farmers and potential investors to increase investment in milk production," he noted.
The CS noted that while the cost of milk production remains high at an average total cost of Sh23.30 per litre for zero grazers, Sh23.00 for semi-zero grazers, and KSh 17.24 for open grazers, the average cost of producing milk declined by 20 per cent over the last five years.
"This shows that we are making headway in managing the cost of producing milk, although a lot more is still required to make our industry more competitive regionally and globally," he said.
National productivity of milk per cow, which increased by 19% from 6.4 litres in 2014 to 7.9 litres in 2019 is still relatively low when compared with average productivity per cow per day in advanced dairy nations such as 34 litres in Denmark and 39 litres in Israel.
The report shows that the largest cost components of producing milk are feeding and labour.
He said gross revenue from milk improved by 3% over the last five years, suggesting an improvement in producer prices for milk. This is expected to be higher since it was done before interventions were undertaken by the Ministry in Jan 2020 to improve and stabilize milk producer prices in the country.
However, it was noted that there is a declining herd sizes per farm over the last five years with the average herd size per farm declined from 9 animals in 2014 to 6 animals in 2019 undermining the country's capacity to be self- sufficient in milk and milk products.
He urged farmers to adopt labour saving technologies such as chaff cutters and milking machines required by dairy farmers to manage operational costs.