EBC Financial Group says rain can end the milk shortage because the dry season cut pasture, but wheat and cooking oil are priced abroad, so core inflation, which the central bank watches, may stay firm in the October and November figures.
Kenya’s rains may end the milk shortage within months, but they are unlikely to lower the price of bread or cooking oil, EBC Financial Group (EBC) says. Agriculture Cabinet Secretary, Mutahi Kagwe links the milk shortage to the dry season, while the Central Bank of Kenya (CBK) says wheat and palm oil prices rose on world markets. This gap shows up in core inflation, a Kenya National Bureau of Statistics (KNBS) measure that leaves out the most unstable prices and guides central bank interest rate decisions. Core inflation rose to 4.0% in September from 3.4% in August, mainly on milk, wheat products, and edible oils, according to the CBK Monetary Policy Committee (MPC) statement of 7 October 2026.
David Precious, Senior Market Analyst at EBC Financial Group, noted that rain can repair what the dry season broke in milk, but cannot change what Kenya pays for wheat and palm oil.
“Milk got dearer because cows had less grass, and rain fixes that. Wheat and palm oil prices are set in the Black Sea and Southeast Asian markets, so Kenyan rain does not reach them. Shoppers may see milk ease first while bread and cooking oil hold,” he said.
Milk is among the ten biggest single items in the KNBS inflation basket: packeted fresh milk ranks seventh and loose milk ninth. The Kenya Dairy Board (KDB) puts consumption at 110 litres a person a year, the highest in sub-Saharan Africa, and government figures show dairy is 4.5% of GDP and supports about 1.8 million smallholder households, so milk price swings reach shoppers and farmers.
The Kenya Meteorological Service Authority (KMSA) outlook says most of Kenya had below-average rain from June to August, and a Nandi County dairy cooperative says daily deliveries fell from about 10,000 litres to under 2,000. Nationally, the KDB says milk delivered to processors fell from 84.4 million litres in June to 75 million in August. Prices followed: fresh packeted milk rose 6.0% in September, according to the KNBS September Consumer Price Index.
Rain Can Help Milk, but Not Immediately
Grass costs less than feed. KDB figures put the cost of a litre at KES 24.50 on open grazing and KES 39.50 with indoor feeding, and Kagwe expects a surplus within months as the October to December rains improve pasture. Relief will not be instant: farmers and traders in the North Rift say feed prices rose by about a third, and Kagwe says some farmers sell to brokers instead of processors.
Late 2023 shows relief can take months. The CBK December 2023 statement said survey respondents expected food prices to fall on the rain, but onions, tomatoes and carrots stayed dear because supply fell. Overall inflation rose in January 2024, and food inflation fell to 5.8% in March 2024 from 6.9% in February when, according to the CBK April 2024 statement, harvests and favourable weather improved supply.
Bread and Cooking Oil Follow Prices Set Abroad
Kenya imported 2.24 million tonnes of wheat in 2025 and grew about 255,000 tonnes, according to the KNBS Economic Survey 2026, so about 90% of its wheat comes from abroad. The CBK links higher world wheat prices to supply limits in the Black Sea region and dry weather in North America, which Kenyan rain cannot change. White wheat flour rose 4.5% in September.
Cooking oil follows the same rule. The Agriculture and Food Authority says imports meet more than 90% of Kenya’s demand, and the CBK says palm oil prices rose for a fourth month on strong import demand and fears that dry weather will cut Southeast Asian output. El Niño, a warming of Pacific Ocean waters that changes rainfall, according to the US National Oceanic and Atmospheric Administration, is currently strong, says the KMSA outlook, and the Malaysian Palm Oil Council (MPOC) says it usually cuts palm oil output 9 to 12 months later.
Therefore, rain can reach only one of the three items behind core inflation. The CBK says a stable shilling is moderating imported inflation but is watching second-round effects, meaning price rises that spread into wages and other prices, and the Energy and Petroleum Regulatory Authority (EPRA) raised diesel by KES 9.90 a litre on 14 October. KNBS published the September figures on 30 September, so the October and November readings arrive before the MPC meets again in December, and a KMSA county director expects above-average rain through November.
Precious added that the next two readings will show whether milk eases while bread and cooking oil stay high. “If milk falls but core inflation stays near 4.0%, rain has helped households before it has helped the central bank’s measure. If higher diesel costs spread into other prices, relief on milk may be smaller than it looks,” he said.
For more analysis from EBC, visit: www.ebc.com.
