Higher milk price won’t increase farmer earnings

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As Kenya’s rankings on the ease of doing business improves, little impact of this is being felt by the small holder dairy farmers. Earnings per litre of milk have been decreasing over the years and there doesn’t seem to be respite in the near future unless the government heavily intervenes to help the farmer.

While many view the price milk processors pay to farmers as the key to higher earnings, closer review of the industry will show that more impactful intervention lies with addressing the critical issue of cost of production.

This is not to say that purchase price is not important and milk processors like ourselves will continue to be challenged to do more. At Uplands Premium Dairies we offer farmers competitive prices consistently across all seasons as we stimulate demand of our products when there is oversupply.

However as earlier stated, the purchase price is just one of the many factors in the supply chain that affects the earnings in the dairy industry.

Top on the list of factors contributing to the low earnings is the ever-increasing cost of feeds. Animal feeds make up about 65 per cent of the total cost of production. Unfortunately the cost of feeds has doubled in the last decade while the quality has deteriorated compounding the problems for the farmers. Farmer centred organizations such as UPDF incur additional cost of analysing quality to ensure farmers get the right quality feeds.

When you talk to feed manufacturers, they blame the rising cost of doing business including cost of power, cost of raw materials, taxation on inputs, unpredictable policies among other things. It is obvious that an intervention on this factor that impacts over half of the total cost of production will significantly affect the bottom line for the farmer. Just like the government has done with the price of maize flour, it is time for interventions that will reduce the cost of animal feeds.

Besides feeds, veterinary services are another critical input for the dairy farmer. The death of the extension officers’ service of the past means farmers have to rely on expensive private practitioners and without proper quality control, farmers often don’t get value for money

The cost of quality semen has been rising over the years. A farmer looking for top breeds is paying upwards of Sh5,000 while technologies like Embryo transfer cost more than Sh100,000. This is a very high cost for our small holder farmers. Without affordable and quality veterinary services, milk yields will continue to dwindle and so will the earnings to the farmer.

Again the saving grace remains with the government. The re-introduction of the government sponsored extension officers’ service is a key factor. The government should also empower government facilities to produce quality semen at relatively affordable cost to the farmer.

For consistent high quality and quantity production, our farmers need regular trainings on the latest practices in dairy production. Delivery of such trainings is therefore critical and the government should be supporting farmers on this. Due to growing demand, we at Uplands Premium Dairies regularly organize such trainings for our farmers but we cannot satisfy the demand.

In addition to the direct costs to the farmer, poor infrastructure in most rural areas increases the transport costs for both the farmer and the milk processors. The poor road network means that farmers spend more money and time to transport feeds and milk to collection centres as well as wear and tear for vehicles. Poor infrastructure also causes delays in delivery of this perishable product leading to deterioration in quality further increasing losses.
All these add to the costs of production which is eventually passed on to the farmer, thereby reducing their earnings.

To increase the earnings per litre of milk to the farmer the government will need to address the cost of production and provide a farmer centric policy environment. For a country that gets over 30pc of its GDP from agriculture there should be heavy investment in capacity building as well as agri-friendly policies to support sustainable growth.

(James Kageche is the Milk Procurement Manager at Uplands Premium Dairies, the producers of Pascha Fresh Milk)

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