Processors reduced the price of raw milk by 3 shillings per liter as the market reacted to a sharp increase in production, but retail prices remained unchanged.

This decision upset farmers with high production costs resulting from the increased cost of feed, some only earning 28 shillings per liter of milk compared to the Sh38 average earned before the exam.

Cooperatives to which farmers are attached usually deduct about 4 shillings per liter from farmers as administrative and transport costs usually charged by processors.

"Dear supplier, because of market forces beyond our control, raw milk prices have been revised downward by 3 shillings per kilogram from 21 January," reads an SMS sent to farmers.

The Kenya Dairy Board (KDB), the regulator of the sector, said milk production had risen sharply since last November, pushing processors to lower their prices.

"There has been an increase in milk volumes from farmers and this has forced processors to adjust prices. This is a case of supply and demand, "said Margret Kibogy, General Manager of KDB.

Kibogy said the two largest companies – Brookside and New KCC – process an average of 1.2 million liters of milk a day, compared to about 800,000 liters in November last year.

The price of 500 m long shelf-life milk is on average 50 shillings for all brands, while those in sachets, for the same quantity, are sold at sh45 in most retail stores.

Farmers protested the price reduction, arguing that low prices due to the high cost of animal feed would prevent them from doing business.

"This news shocked farmers, especially at a time when the cost of animal feed is high," said Stanley Ng'ombe, president of the Kenya Dairy Farmers Federation.

Ng'ombe said the cost of production per liter of milk was 22.75 shillings, adding that the current price makes it difficult for farmers to be fair.

However, the board sets the cost of production at 19 shillings per liter for zero grazing, 17 shillings for semi-zero grazing and 10 shillings for open-field grazing.

This is the first time in two years that processors have lowered their price considerably, after it has remained constant throughout the last year.

The Business Daily could not get any response from the processors, with phone calls and emails sent unanswered.