Rains may ease milk prices but Kenya’s bread and cooking oil follow the world

The long rains could end the dairy shortage in months, but wheat and palm oil are priced in markets that Kenyan weather cannot reach

By Jane Njeri

Kenya’s rains may bring relief to dairy farmers and milk consumers within months, but they will do little to lower the price of bread or cooking oil — and that distinction matters enormously for both ordinary households and the Central Bank of Kenya as it monitors inflation heading into the final quarter of the year.

That is the assessment of EBC Financial Group, whose senior market analyst David Precious yesterday laid out why the October-to-December long rains, now under way across much of the country, will address only one of the three main drivers pushing core inflation higher. Core inflation — the measure the central bank watches most closely when setting interest rates because it strips out the most volatile prices — rose to 4.0 per cent in September from 3.4 per cent in August, according to the CBK Monetary Policy Committee statement of 7 October. The three items principally responsible were milk, wheat products and edible oils.

Milk is the one that rain can fix. Agriculture Cabinet Secretary Mutahi Kagwe has linked the shortage directly to the dry season, which ran from June to August and cut pasture coverage across much of Kenya. The numbers bear this out starkly. A Nandi County dairy cooperative reported that daily deliveries fell from roughly 10,000 litres to under 2,000 litres during the dry period. Nationally, Kenya Dairy Board figures show milk delivered to processors dropped from 84.4 million litres in June to 75 million in August. Prices followed: fresh packeted milk rose 6.0 per cent in September, according to the Kenya National Bureau of Statistics Consumer Price Index, making it one of the sharpest single-item increases in the basket. Packeted fresh milk ranks seventh and loose milk ninth among the ten largest individual items tracked by the KNBS — a reflection of just how central dairy is to Kenyan household budgets, to the 1.8 million smallholder households that depend on it for income, and to an economy where dairy accounts for 4.5 per cent of GDP and annual per capita consumption of 110 litres is the highest in sub-Saharan Africa.

Improved pasture will cut the cost of production. KDB figures put the cost of producing a litre at KSh24.50 on open grazing against KSh39.50 with indoor feeding, a gap that narrows significantly when cows have access to grass. Kagwe has said he expects a surplus within months. But Precious cautions that the timeline for consumer relief is not instant. Feed prices in the North Rift rose by roughly a third during the dry period, and some farmers have shifted to selling through brokers rather than to processors, complicating the supply chain. History supports patience: following the late-2023 dry spell, the CBK April 2024 statement recorded that food inflation fell from 6.9 per cent in February to 5.8 per cent in March only after harvests improved.

Bread and cooking oil operate under entirely different rules. Kenya grew approximately 255,000 tonnes of wheat in 2025 against imports of 2.24 million tonnes, meaning around 90 per cent of its wheat comes from abroad. White wheat flour rose 4.5 per cent in September, driven by supply constraints in the Black Sea region and dry conditions in North America. Cooking oil tells a similar story: the Agriculture and Food Authority estimates imports meet more than 90 per cent of domestic demand, and the CBK notes that palm oil prices rose for a fourth consecutive month on strong global import demand and fears that current El Niño conditions — which the Malaysian Palm Oil Council says typically cut palm oil output nine to twelve months after onset — will reduce Southeast Asian harvests.

There is a further complication. The Energy and Petroleum Regulatory Authority raised diesel by KSh9.90 a litre on Tuesday, a move the CBK has flagged as a potential source of second-round inflation effects, meaning higher transport and production costs that spread into other prices and could dilute any milk-driven relief.

The next two inflation readings, due before the MPC meets again in December, will determine whether the rains have helped households faster than they have helped the central bank.

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