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Workers at a milk processing plant. Kenya’s change of heart is a blessing for Uganda’s milk powder producers. PHOTO | FILE | NMG

Authorities in Nairobi have placed order for more suppliers of milk powder from Uganda following reports that a drop in milk production is expected in the coming months.

The EastAfrican has learnt that the Kenya Dairy Authority has opened a window for more milk powder imports from Uganda as the July-August and December-February dry months approach. During these months, Kenya is usually plunged into a liquid milk production deficit, which pushes up prices.

“Kenya is to increase the number milk importation permits to more milk powder from Uganda which they have been restricting to be landed on their market,” Akankiza Mpiira, executive director at Uganda’s Dairy Development Authority told The EastAfrican.

Read: Kenya dairy imports from Uganda nearly triples to $210m

But Brookside Uganda is unlikely to benefit from this window, as authorities in Kenya maintain the ban on dairy products produced by the manufacturer. The firm owned by Kenya’s former first familiy has applied for 100 permits since March 2023, but has not been cleared to export to Kenya.

This leaves Pearl Diaries and Amos Diaries to take advantage of the milk powder market in Kenya, but the two are also not exporting as much to Kenya, which continues to keep out Uganda’s milk powder to create a market for liquid milk, especially during times of overproduction. 

Dairy industry players say that for each kilogram of milk powder locked out, a market for 10 litres of liquid milk is created.

“Liquid milk exports are accepted in Kenya but milk powder is restricted. This is because each kiligramme of powdered milk stopped, the market for 10 litres of liquid milk is protected,” the DDA says.

Despite the unpredictability of the Kenya export market, the country’s appetite for Ugandan milk remains high. South Sudan, Tanzania, DR Congo, Rwanda, Burundi and Somalia closely follow in that order. Combined, Uganda exports 86.6 per cent per cent of its milk within the EAC market.

Kenya’s change of heart is a blessing for Uganda’s milk powder producers. They ramped up production with hopes of exporting to Algeria, but a year after the market was secured no powder has left the Kampala and Mbarara powder milk plants for Algiers.

Read: Uganda turns to N. Africa for milk market

Ugandan powder milk makers have adopted a wait-and-see attitude towards the Algerian market, discouraged by the low prices the buyers in Algerian are offering.

“The price of powder milk is too low for manufacturers to recover the production and delivery costs,” a dairy industry expert explained, saying it has become expensive to deliver the milk.

The continued attacks on commercial ships by Houthi rebels in the Red Sea and the Gulf of Aden have forced shippers to reroute vessels, leaving the Mombasa port to off the South African coast to avoid a shorter route off the Somalia coast to the Gulf, which eats into margins of the milk processors.

Information from maritime players indicates that the cheapest way to ship the milk from Kampala is by loading it on a truck from Kampala to Mombasa port, transfer to a vessel, and ship to Algiers port.

The route’s total transit time is estimated at around 30 days, including loading and unloading operations at origin and destination as well as terminal handling at transit terminals freight rate of $7,003.

Uganda manufacturers foresee a hard landing in the Algeria milk market due to low price offerings for their products, amid high freight costs fueled by attacks on ships on the Red Sea and Gulf of Aden in the Middle East by Houthi rebels.

Read: Red Sea crisis fuels fresh wave of EA rate hikes

In Uganda, the average ex-factory price of milk powder is Ush18,500 ($4.8) per kg, which means the processors need to more than double the price of the product in Algeria to post a profit.

“The processors foresee smaller margins. That is why they are delaying to ship the milk to Algeria,” Mpiira told The EastAfrican.

The Uganda milk industry was betting on the $500 million milk export market in Algeria after the country’s liquid milk production crossed 3.8 million metric tonnes in the full year ending December 31, 2023.

Despite the market entry challenges, milk powder is now the most exported product accounting for approximately 54.2 per cent of the total exports followed by UHT at 33.1 per cent, trading data from DDA indicates.

Uganda state minister for animal industry Bright Rwamirama says the dairy industry is contributing significantly to Uganda’s economy, providing livelihoods for millions of people and contributing to food security and nutrition.

The sector contributes 6.5 percent of the country’s agricultural GDP. The prevailing supportive investment climate has equally contributed to a steady inflow of foreign direct investment in the large-scale dairy processing category. By KABONA ESIARA, The East African

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