Unrealized exchange commodities, growing losses in dry milk and butter production, and falling butter prices in Europe and worldwide are holding back the growth of raw milk prices in Ukraine, according to the Association of Milk Producers (AMP).
The industry association noted that the average purchase price of extra-grade milk as of October 6 was UAH 17.45/kg excluding VAT, which is UAH 0.1 more than in the previous month, Prices for premium milk (UAH 17.15/kg excluding VAT) and first-grade milk (UAH 16.80/kg excluding VAT) remained unchanged.
“Prices also remained stable compared to the results of monitoring in the second half of September. Compared to the same period last year, the price of extra grade milk decreased by 25 kopecks,” experts noted.
According to AVM analyst Georgiy Kukhaleishvili, many factors are holding back the growth of raw milk prices in Ukraine. Currently, the supply of exchange goods on the domestic market exceeds demand. Milk processing enterprises have been working at full capacity since mid-August after the suspension of milk exports to the EU following the exhaustion of quotas. At the same time, demand on the domestic market remains low due to a decrease in the number of consumers and a reduction in the purchasing power of the population. Sales of dairy products in supermarkets are growing only when promotional discounts are offered. Warehouses in Ukraine are almost completely filled with exchange goods, which puts pressure on milk prices.
According to the ABM, the situation with butter in the EU is indicative, as it has fallen in price by 24% over the past two months due to the arrival of American butter on the European market at a price of EUR 5,000/ton. In such conditions, European traders are not interested in buying Ukrainian butter, which costs more than American butter. The increase in electricity costs affects the growth of the cost of Ukrainian products and makes it difficult to compete with Americans in the European market, analysts explain.
In Ukraine, in the second half of October, there is a possibility of a maximum price reduction for extra-grade and higher-grade raw milk due to the growing unprofitability of dry milk and butter production at milk processing enterprises and a decline in world prices for butter, they predict.
“However, on October 13, new quotas for the export of dairy products to the EU for Ukrainian companies are expected to be signed. Quotas for butter have increased from 5,000 tons to 7,000 tons, as well as for dry milk. Dairy exports to the EU are expected to resume on October 28, after the quotas come into force in 15 days, which may curb the fall in raw milk prices in Ukraine,” the ABM notes.
“Ukrproduct Group, a major Ukrainian producer of packaged butter and processed cheese, increased production of kvass and beverages by 42.5% in local currency in the first half of 2024 and increased their output by 13.1% compared to the first half of 2023, the company said in a report to the London Stock Exchange on Monday.
Sales of kvass and other beverages in the first half of 2024 amounted to GBP1.1 million (…). This growth was driven by a combination of price increases, new product launches, distribution expansion, and favorable weather conditions for sales, the agricultural holding said.
The volume of oil sales in the first half of 2024 amounted to GBP1.8 million, which is 25.6% more in monetary terms and 9.5% more in production compared to the same period last year. Sales were made through the key sales channels – retailers, large distributors and exports.
In the Processed Cheese and Processed Cheese Products segment, sales amounted to GBP10.7 million, which represents a decrease in revenue of 2.2% in local currency and a decrease in volume of 10.8% compared to 1H2023.
“This was mainly due to financial difficulties for some clients and a shift in focus towards profitability,” Ukrproduct Group explained.
Spread sales for the reporting period decreased to GBP1.7 million, down 14.1% in local currency and 13.1% in volume compared to the same period last year. The agricultural holding explained the decline by increased competition in the market.
Skimmed milk powder sales for the six months of 2024 also decreased by 14.2% in local currency to GBP0.5 million and by 14.7% in volume compared to the same period last year, which is a continuation of the downward trend of the previous season.
Due to low prices for skimmed milk powder, the group minimized the production of this product, deciding instead to use semi-finished milk protein as an ingredient in the production of processed cheese, the agricultural holding said.
“Business development in the second half of 2024 remains extremely uncertain due to the ongoing war in Ukraine.
The Group continues to make every effort to implement its strategy in a very challenging business environment, not least by ensuring a stable electricity supply and responding to new challenges. In the next six months, the Group expects to focus on maintaining its existing production capacity, supporting sales volumes and continuously improving operational efficiency,” Ukrproduct Group summarized.
“Ukrproduct Group is a major Ukrainian producer of packaged butter, processed cheese and kvass. The company produces dairy products under the Nash Molochnyk, Nash Syrok, Molendam, and Vershkova Dolina brands and kvass under the Arsenievsky brand.
Ukrproduct Group operates two plants in Zhytomyr (one specializing in processed cheese and the other producing kvass) and two enterprises in Khmelnytsky region: a dairy plant in Starokonstantinov producing packaged butter, spreads, cheese and milk powder, and a dairy plant in Letychiv.
The group’s production capacity allows it to produce up to 70 thousand tons of dairy products per year.
In Ukraine, following the European Union, butter prices continue to rise, with prices in Europe reaching record levels, according to Infagro, an industry analytical agency.
“Not all Ukrainian butter producers can take advantage of the opportunity to make good money on butter exports, as it was in 2022. There is currently a physical lack of raw materials to produce large volumes,” the analysts said.
According to their information, due to rising prices and a number of other factors, butter production decreased slightly in August. This will be followed by a decline in production of this commodity due to a lack of raw materials at affordable prices.
They noted that domestic butter prices are also rising alongside export prices, albeit with a certain lag. Butter prices will continue to rise, at least domestically. Analysts predict a price collapse in foreign trade in mid-autumn.
Infagro noted that the production of spreads and vegetable-cream mixtures is currently stable, but should increase in the near future. Demand for alternative milk fats will increase given the current price of butter.
Ukraine’s export of butter increased by 50.8% to 2.568 thousand tons, in monetary terms – by 44.4%, to $13.891 million. Imports of this products fell by 3.8 times, to 182 tons, in monetary terms – 3.3 times, to $ 1.362 million.
Most of the butter was exported to Moldova (27.97% of supplies in monetary terms), Azerbaijan (19.10%) and Israel (13.55%). Imports came from Germany (48.94%), France (17.09%) and Poland (12.84%).
Milk and dairy products (especially butter) were most often falsified among food products in the first quarter of 2021, and the most common violation in the production of butter is the presence of non-dairy fats, the State Service of Ukraine on Food Safety and Consumer Protection said.
According to the agency, the second common type of violation this year is the inconsistency of food labeling.
The service clarified that since the beginning of the year, it has carried out 85 scheduled and 2,900 unscheduled inspections. As a result, more than 31 tonnes of products were withdrawn from circulation, including 6 tonnes of milk and dairy products, 4.7 tonnes of fish, 3.3 tonnes of poultry, 2 tonnes of meat and meat products. The department made 49 decisions to suspend the circulation of food products, transferred 11 cases to law enforcement agencies and issued fines to violators in the amount of over UAH 1.6 million.
“The food products that Ukrainian consumers buy must be safe and meet all legislative norms and requirements. We must protect consumers. Work in this direction will only intensify,” head of the department Vladyslava Mahaletska said.
As reported, the State Service of Ukraine on Food Safety and Consumer Protection in March introduced a unified quality standard for raw milk, within the framework of which the Milk Module was launched – software for the automatic collection of research results for dairy raw materials.
According to Mahaletska, the Milk Module calculates the level of total bacterial contamination and the number of somatic cells in milk raw materials. Milk producing farms and milk preparation points in nine regions of Ukraine are involved in the raw milk control program. The project is already being implemented in Kharkiv, Vinnytsia, Mykolaiv and Poltava regions, while Khmelnytsky, Donetsk, Dnipropetrovsk, Kyiv, Volyn and Sumy regions are ready for its launch.
Exports of Ukrainian butter decreased 43.7%, to 8,540 tonnes, and in monetary terms 40.5%, to $37.43 million.
Import of this product in the reporting period amounted to 9,010 tonnes ($35.38 million) against 1,330 tonnes ($7.19 million) in January-September 2019.
According to the ministry, export of milk and cream (condensed) in the first nine months of 2020 decreased 30.3%, to 21,540 tonnes.
Ukraine supplied condensed milk and cream for a total of $43.6 million, which is 33.5% less than in January-September last year.
Import of this group of goods increased 3.2-fold, to 4,870 tonnes, in monetary terms by 3.3 times, to $10.95 million.
