1. Uganda produced 1.5 billion liters of milk in 2007. 1.6 billion liters were projected for production in 2008. Of the milk produced, 70% is available for the market (1.05 billon for 2007 and 1.1 billion for 2008). The rest of the milk is consumed by the farming households and their neighborhoods.
2. Milk available for the market, therefore, is approximately 3 million liters per day. The total installed capacity for milk processing in Uganda is approximately 560,000 liters per day (including the 320,000 liter capacity of Sameer). This means milk available for processing is 5 times the available processing capacity.
3. The milk processed in Uganda is 10% of the total milk available for the market. The rest of the milk is marketed unprocessed or semi processed.
Challenges facing milk powder export:
1. The problem started around middle of 2008 with the collapse of the price for milk powder on the world market. It dropped from a high of 5,800 USD a ton in mid 2007 to the low of about 2800 USD a ton in mid 2008. By April 2009, the price for milk powder on the world market was below 2000 USD a ton.
2. The cause for the drop in the price of milk powder was attributed to the over production of milk in USA, India and New Zealand.
3. The cost of transport from Kampala to Mombasa made a bad situation worse and there is no way the company could have been competitive with such depressed world prices.
4. The quantities produced by Sameer are too small to benefit from the economies of scale. While 200,000 liters of milk that Sameer can convert to powder daily may sound big the truth is that this is very small by world standards. Reasonable plant capacity should be at least 500,000 liters and preferably 1 million liters per day.
Due to some improvement in demand for milk powder in the East African market, some orders have been placed for Sameer to supply milk powder. However, the company is experiencing problem getting fresh milk to meet this demand. Why is Sameer not getting milk for his milk plant when 90% of the milk is marketed unprocessed? The explanation is largely as follows:
1. The price Sameer pays to the farmers is the lowest in the country. The company procures most of its milk from the South western milk shed. This is about 300-350 km from Kampala. There is therefore high cost of transport especially as it is road transport. For the company to break even, it inevitably has to pay low prices. The money that goes to the farmer is UGX 270 per liter. This does not make business sense as the parallel markets pay minimum 300 UGX per liter and often 350 UGX per liter.
2. Sameer arbitrarily closes milk collection centers when he has pressures on his side without considering the impact this closure will have on the farmers. The cows produce milk all the time they are in lactation, whether the plant has problems or not.
3. During the periods when the milk collection centers are closed, the farmers secure other markets. The tendency to keep hooked to those markets even when Sameer opens is obvious.
Issues to note:
1. There is sufficient milk in the country and the current processing capacity cannot absorb it all.
2. DDA regularly updates milk availability in the country, and so the public should access this information.
3. We appeal to more investors to take up this opportunity.
Thank you and God bless you all.
Dr. Nathan Twinamasiko
Executive Director
Dairy Development Authority
12 May, 2009
PRESS RELEASE 
