Dairy farmers are now earning three times more in milk profits across the country due to stabilized prices, a new report shows.
In 2019, dairy farmers earned milk profits of Kes 12.20 per litre compared to Kes 4.20 in 2014 signaling a profitable sector powered by high milk demand and government’s interventions to stabilise milk prices.
The average milk price in 2019 was Kes 36.1 per litre, with the highest price reported in Machakos-where hotels were the main buyers. Dairy cooperatives offered a price of at least Kes 30 per litre.
Speaking this week while launching the cost of milk production study report 2021 in Nairobi, Agriculture Cabinet Secretary Peter Munya urged farmers to continue investing in the dairy noting “the sector is profitable”.
The CS while acknowledging the challenges facing the sector such as feeds, labour cost said, “these findings should excite and motivate farmers and potential investors to increase investment in milk production.”
According to the study, the second of its kind, conducted in 20 counties to estimate the cost of producing milk in different scales of the production systems-profitability varied with production system, highest for semi-zero grazers at Kes 14.27 per litre, and lowest for zero grazers at Kes 8.57 per litre.
With the addition of other revenues from the dairy enterprise such as sale of livestock and manure, the average whole enterprise profit was Kes 16.20 per litre of milk, the report continues.
The first study was conducted in 2015. It was undertaken by Tegemeo Institute of Agricultural Policy and Development of Egerton University in collaboration with the Kenya Dairy Board.
Last year, the Ministry of Agriculture imposed the minimum price of Kes 33 a litre to cushion farmers against low earnings; this will be reviewed after every six months.
This, coupled with the Dairy Industry Regulations launched on March 17, have helped stabilise the prices, noted the CS.
The report notes that prices were relatively higher in the informal markets, ranging between Kes 30 and Kes 60 per litre, highlighting their importance in linking producers to markets and improving profitability of dairy production. But it was mainly observed in Machakos, Bungoma, Narok, Kakamega and Kisii, which are generally milk deficit areas.
Unlike in 2014 where half of the counties reported that the main buyer of milk were traders, in 2019-milk producers in 4 out of the 7 counties mainly sold milk to dairy cooperatives.
According to the Kenya Dairy Board, the country’s annual milk production is at 5.28 billion litres, produced by 1.8 million smallholder dairy farmers.
Kenya’s milk production in 2019 was approximately 11 per cent of the 49.9 billion litres of milk produced in Africa.
Munya also urged dairy farmers to focus on quality animal feeds to increase dairy productivity in the country whose per capita consumption of milk is estimated to increase to 130 litres per person per year by 2030.
“We have a growing market for milk and milk products in the country. The country needs to sustainably improve production of milk to serve the domestic and export markers and transform the rural livelihoods,” Mr Munya said.
However, comparison of findings between 2014 and 2019 showed that the herd size is small and has been declining, while the number of lactating cows remained across the two years. In 2014, the average herd size was nine while in 2019 it reduced to six.
The production of milk per cow per day increased by 19 per cent but it remains relatively low at 7.6 litres hence a negative effect on farmer’s returns-the report further states.
Average national productivity of milk per cow was 6.4 litres in 2014 and 7.9 in 2019. In advanced dairy nations such as Denmark it stands at 34 litres and 39 litres in Israel.
Small herd size, noted Margaret Kibogy, Kenya Dairy Board managing director, may limit the profitability of the dairy enterprise hence the need to “look at ways of increasing efficiency in terms of production per cow”
Kiambu and Meru counties had the highest yields per cow in litres of milk according to the report. Kiambu had 4,500 litres while Meru had 4,200 litres.
Kibogy attributed the high yield per cow in litres in both Kiambu and Meru counties to the commercialization of the dairy sector and improved genetics.
Dairy industry is growing at an estimated five per cent per annum in production and at seven in processing and value addition.
In 2020, the country was able to process 684 million litres, an increase of 9.5 percent from 652 million litres in 2019.Of the processed milk, 62.4 per cent was UHT, 25.5 per cent pasteurised, 6.14 per cent yoghurt, 3.16 per cent mala and 0.29 per cent WMP.
Under zero grazing, noted the report, the cost of feed concentrates to total variable direct costs was 40 percent, followed by purchased fodder and hired labour at 22 percent each. It highlighted the need to implement interventions around feed and labour to lower the costs of producing milk.
Nickson Sigei, Chairman of Kenya Dairy Board and New KCC Chief Executive Officer said dairy processors needed to partnerships with farmers on extension services, breeding and nutrition to improve dairy productivity at the farm level.
He noted that these are very, “important component of the dairy value chain that would enable the sector remain competitive”
Mr Sigei also challenged the government to reduce taxes on dairy equipment’s to enable processors check on their cost of production.
CS Munya said the government is also planning to form a fertiliser and feed regulator that will look at the quality of feeds to steer productivity in the sector.
“Quality of animal feeds available is a major issue. We are in the process of operationalizing a provision in the law that has created a board for a fertiliser and feed regulator to look at that gap,” said Munya.