Covid-19: An opportunity, or yet another blow for Kenya’s dairy sector?
Milk plays an essential role in Kenya’s food security, since it is consumed by most households throughout the year. The preferred form of consumption is in tea, with many households also taking fresh, or fermented milk (known as maziwa lala, or mala). Other processed milk products, such as cheese and yoghurt, are favoured by better-off households.
The dairy sector in Kenya is one of the largest agriculture sub-sectors in Kenya, contributing up to 30% of livestock-sector gross domestic product (GDP), and 4% of the overall GDP. The country’s dairy farmers produce an estimated 3.5 billion litres of cow milk annually, or an average of 93.3kg per capita, making them among the highest consumers in Africa.
The Kenyan dairy sector is characterised by small-scale dairy farmers, who supply around 80% of milk marketed through both formal and informal channels. Most producers trade directly in informal channels, selling raw, unprocessed milk to local kiosks, mobile milk traders, and milk bars, who then sell to individuals at retail prices. These informal channels account for up to 86% of milk traded, with most rural households buying raw milk from farmer families. Raw milk is also preferred by most urban households as it is cheaper than processed milk. Many retail outlets, especially in informal settlements, sell both raw and processed milk to cater for different consumer markets.
Milk quality: an ever=present concern
For years, Kenya’s unregulated dairy markets have been a source of concern from a food safety perspective. The health risks from consuming raw milk are evidenced by the high rates of severe infections — including brucellosis, which recorded 75,256 cases of infection in 2012.
In addition to the health, and economic toll of milk-related disease outbreaks, it is further estimated that raw milk accounts for approximately 855 deaths annually in Kenya. While most households tend to boil their milk before consumption, this has been said to only reduce safety risks related to pathogens. Other factors, such as aflatoxins that may be present in animal feeds and end up in milk, cannot be eliminated by boiling . Among other factors predisposing milk to contamination is adulteration by water/margarine, and high levels of antibiotics or illegal chemical products to preserve the milk. Efforts to address the safety of raw milk have always sparked conflicting opinions, with some expressing that “unrealistic” milk safety laws aim at over-policing the industry to enrich large milk processors.
Since the first case of Covid-19 was reported in early March, the impacts on the food system have been extensively highlighted. This article explores how Kenya’s dairy sector is responding to the pandemic by highlighting the views of actors at various levels of the milk value chain.
How has the dairy farmer been affected?
Mostly as a result of direct and indirect impacts of control measures the government took to minimise the spread of the pandemic, the dairy farmer faced increasing challenges. Fear of Covid-19 infection was especially high at the initial stages of the first few cases, preventing farmers from venturing outside their farms. Early containment measures that outlawed movement before curfew hours hit the sector particularly hard as it affected the early morning routes of milk transporters. Some farmers therefore relied on mobile milk buyers, who would sometimes offer very low prices. The closure of learning institutions also forced farmers and cooperatives to sell their milk through informal markets.
Impacts on the dairy supply chain
Kenya imports over 70% of the raw materials used to manufacture animal feeds, most of which consists of grain and oil-seed cake by-products. The country is also highly dependent on across-border supplies of animal feeds, drugs, and supplements, especially from neighbouring Tanzania and Uganda. The pandemic-induced border closures therefore had a major impact on the sector.
In a report published in May, following the pandemic-induced closures of the main borders, the World Bank highlighted logistical challenges faced by transporters using alternative border crossings, such as the much longer route via South Sudan. This had knock-on effects for animal feed millers, and other suppliers across the entire value chain. Waweru Nyangi, Chairperson of Nakuru Dairy Value Chain Platform explained that as a result of declined farmer incomes, the first thing farmers will reduce or eliminate are feed concentrates like dairy meal, reducing overall productivity.
Another key consequence for the sector is access to farmer training. Martin Kangocha, a dairy expert working with the Green Innovation Centre of German development agency, GIZ, told us that capacity-building programmes for farmers have slowed down due to social distancing rules. The Centre has resorted to a SMS-based learning interface, and encourages direct farmer-to-farmer knowledge sharing, as well as support through local cooperatives.
How has Covid-19 affected dairy processors?
Less than 20% of milk sold in Kenya is marketed through formal channels. In the recent past, milk processors have been accused of exploiting dairy farmers by offering ridiculously low prices of up to KES 17 per litre, compared to an average cost of production of between KES 24 and 34 . By contrast, the price of processed milk averages between KES 110 to 120 (around US$1.1 to 1.3), with only around KES 24 reaching the farmer after deductions, meaning that the farmer is not making any profit. Moreover, delayed payments by processors cause many farmers to sell their milk to hawkers, who provide on-the-spot payment, and often offer higher prices than mainstream processors.
With a reported 40% drop in milk deliveries, Covid-19 has further magnified this phenomenon. The Kenya Dairy Board has attributed this to reduced production, which has added to already-existing market challenges. One of these challenges is Kenya’s dependence on imported cattle feed, as well as raw materials for processing plants, which was greatly impacted by Covid-19 border closures. It is estimated that 5000 dairy outlets, out of a pre-pandemic coverage of around 128,000 outlets, have closed down, leading to further reductions in milk sales.
In the first half of 2020, deliveries dropped by 8.24 million litres, compared to the same period in 2019 when farmers delivered around 319 million litres to processors. To attract more farmers, one of the leading processors, Brookside Dairies, is now paying 17% more per litre for raw milk, pushing their processor price by around KES 20. This increase will result in consumers paying more for milk, as processors adjust their prices upwards.
How are consumers responding?
With Covid-19 slowing down economic activities, the resulting massive income losses, payment cuts, and decreased sales, have been a common theme in many Covid-19 analyses. As consumers’ financial certainty declined, they had less to spend on basic commodities, with many forced to switch to cheaper foods. According to data from the Kenya Dairy Board, monthly milk intakes have shown a declining trend since the outbreak of the pandemic. In May, for instance, Kenyans consumed 12.2 million liters less milk than in April.
In a recent media briefing Jackline Kittony, marketing manager at packaging company Tetrapak, observed that sales of family-sized milk packs had surpassed smaller packaging. She attributed this to the prolonged closure of high schools, and higher-level institutions, leaving families with more mouths to feed. When I was in high school, one of the few “snacks” that students were allowed to bring to boarding school was boxes of milk. And since students would buy smaller-sized volumes for one (usually 250 ml), these sold out fast. The same is true of university, and college students, most of whom went back to their family homes following the Covid-19 closures.
Speaking at the same briefing, Colm D’Olier, general manager of dairy ingredients and equipment supplier Promaco East Africa, highlighted the reduced consumption of value-added dairy products. He reported that consumption of yoghurt had declined by around 30 to 40%, while cheese has become one of the least consumed products. In addition to these products being viewed as luxury items, he noted that sales of cheese in particular were also hit by the closure of many hotels, restaurants, and cafes, which are the largest buyers.
In addition to reduced income, consumer behaviour is also increasingly driven by growing awareness of food safety risks. Coupled with sluggish sales of fresh milk, these demand-side shifts have pushed processors to pay more attention to quality of produce. According to the Africa Milk Organisation, retailers are selling more long-life dairy products. This is due to the desire to minimise spoilage of raw, and fresh processed milk in the absence of refrigeration, as well as to reduce the frequency of shopping visits.
Health concerns have also driven up sales of immunity-boosting foods, such as probiotic yoghurts, and cultured milk. Commonly known as mala, cultured milk is one of the most popular processed dairy products as it is affordable, and often consumed alongside staple meals, such as ugali (stiff maize porridge) and sukuma wiki (kale).
How can these Covid-19 impacts be addressed to build the dairy value chain?
In a previous article, I explored some of the ways in which Covid-19 is teaching us about the importance of food self-sufficiency. For years, the country’s macroeconomic policies — including high taxation rates for fertilisers, farm equipment, and other basic inputs — have disincentivised farmers and agro-entrepreneurs. It made more economic sense to import key commodities (including an estimated 70% of livestock feed inputs) from neighbouring countries. The border closures that followed disputes with Kenya’s neighbours about Covid-19 controls further highlighted the country’s vulnerability to supply chain disruptions.
In order to wean itself from such dependence, Kenya’s livestock sector needs to explore production efficiencies, as well as innovation, so as to improve its competitiveness. Key areas of attention include: increased capacity building for farmers and other value chain actors; and more efficient use and storage of animal feeds, which account for up to 80% of dairy production costs. Improved access to extension services would enable faster uptake of technologies such as artificial insemination, or improved breeding and pasture improvement to improve the husbandry, all contributing to higher milk production, as well as quality.
Perhaps one of the low-hanging fruit opportunities for farmers is producing their own feed inputs. Kangocha explains that, oftentimes, farmers resort to expensive pre-formulated feeds, rather than growing feed materials on their own farms, even when they have been trained in this area. One of the reasons for this is that most smallholders keep small herds of up to 4 cows, and hence believe their small unit does not warrant feed production. Moreover, most farmers have not invested in quality storage of feeding materials, but rely on grasses that are oftentimes fed directly to the animal. Quality storage would therefore facilitate lower cost of production, by enabling the mass production of feed, or purchasing feeds in bulk to reduce costs.
Another strategy for improved self-reliance is diversified marketing of dairy products, rather than relying on just one outlet, such as cooperatives, or institutions. Farmers can also cushion themselves against losses by taking a more commercial approach to milk production, aiming at increasing their daily milk output of 7 to 10 litres per cow.
It is also essential for primary cooperatives to explore collaboration in order to aggregate their services and achieve greater economies of scale. For example, larger cooperatives can invest in large-scale processing plants at county, or sub-county levels, enabling them to produce livestock feed and process raw milk at lower cost. Kangecha stresses that to do this, the managers of cooperatives need to have the farmers’ needs at heart, by encouraging greater ownership by members, and involving experts in day-to-day operations such as enterprise management, feed production, and extension.
The dairy sector may have escaped the fate of more export-reliant sectors, such as Kenya’s tea, coffee, floriculture, and hospitality industries. However, Covid-19 has underscored, once again, the urgent need to address existing systemic challenges if the country’s dairy producers, consumers, as well as actors across the entire value chain are to fully tap its potential.
Written by Sharon Cheboi
This article is part of Covid-19 Food/Future, an initiative under TMG ThinkTank for Sustainability’s SEWOH Lab project (https://www.tmg-thinktank.com/sewoh-lab). It aims at providing a unique and direct insight into the impacts of the Covid-19 pandemic on national and local food systems. Also follow @CovidFoodFuture, our Video Diaries From Nairobi, and @TMG_think on Twitter. Funding for this initiative is provided by BMZ, the German Federal Ministry for Economic Cooperation and Development.
