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.
