The increase in raw milk prices in the second half of November was due to the growing interest of European traders in domestically produced butter, but the decline in demand for dairy products in the domestic market may stabilize prices in the second half of December, according to the Association of Milk Producers (AMP).
According to analysts, as of November 20, the average purchase price of extra milk increased by 1 UAH/kg to 19.40 UAH/kg excluding VAT, the price of premium milk increased by 1.20 UAH/kg to 18.65 UAH/kg excluding VAT, and the price of first-class milk increased by 1 UAH/kg to 17.7 UAH/kg.
Accordingly, the weighted average price of the three varieties amounted to 18.58 UAH/kg excluding VAT, which is 1.07 UAH more than a month earlier.
AVM analyst Giorgi Kukhaleishvili noted that another increase in raw milk prices in Ukraine was caused by the increased demand for butter in foreign markets in November.
“As the price of New Zealand butter rose to $7 thousand/ton, European traders started to turn to Ukrainian producers with a desire to buy butter at more attractive prices. After a slight decline in demand for exchange-traded products at the beginning of the month, there is now an increase in interest in butter and cheese on foreign markets,” the expert explained.
At the same time, the AMP points to a decrease in demand for raw milk from Ukrainian dairy processing enterprises in November compared to September-October. At the same time, the growth rate of purchase prices is gradually slowing down due to a decrease in consumer demand for dairy products in the domestic market.
“Ukrainian consumers with below-average incomes have started to deny themselves dairy products due to rising prices not only for dairy products but also for other food products. Consumption of spreads is growing in the country as a cheaper alternative to butter,” the industry association stated.
The growth of raw milk prices is constrained by high prices for finished products and the difficulty of selling them to consumers in the domestic market. Under such conditions, a slight increase in purchase prices is possible in early December with the prospect of further stabilization in the second half of the month, the AMP predicts.
The price of milk in Ukraine has risen by UAH 2, or 15%, since the beginning of July and will continue to rise in September, according to Infagro, an industry analytical agency.
“This scale of price increase is unprecedented for the Ukrainian raw materials market. And this is not the limit of price growth. In September, analysts predict a further increase in milk prices,” the analysts said.
They cited market changes, shortages of raw materials and rising costs due to limited energy supply as the reasons for the significant rise in the price of milk and dairy products.
Experts also noted that in the second half of August, hot weather set in again, which did not allow cattle to recover from the abnormal July heat. Cow productivity did not increase. The seasonal decline in milk production also contributed to the problem. At the same time, demand for raw materials increased, which led to a further significant rise in milk prices. In the last week of August, the problem of energy supply became more acute due to another hostile shelling.
In addition, in July, both the number of cows and milk production decreased significantly. Analysts cited data from the Ministry of Agrarian Policy and Food, according to which, as of August 1, 2024, 1 million 255.4 thousand cows were kept in the private and industrial sectors of Ukraine, which is 7% less than a year ago. In agricultural enterprises, the number of cows decreased by 2%, to 380 thousand. The statistics for August are not better, according to the analytical review.
“Given the high cost of raw materials and the influence of other factors, dairy products are becoming more expensive. And if prices for finished dairy products are growing slowly, the cost of exchange goods has increased quite quickly and significantly,” Infagro summarized.
Ukraine increased export of condensed milk and cream fourfold – up to 6.747 thousand tons in January-March 2023. Ukraine exported condensed milk and cream totaling $17.680 million in January-March 2023 (+83.8% for the same period). Imports of this group of products decreased by 3.2 times, to 220 tons, in monetary terms, fell by 4.8 times – to $ 940 thousand.
Most exports of condensed milk and cream went to Poland (21.74% of deliveries in monetary terms), Israel (10.16%) and Bangladesh (9.08%), while imports – from Poland (55.64%), Czech Republic (28.62%) and Germany (13.72%).
Russian missile strikes on Ukraine have left the country’s dairy industry without electricity, resulting in the shutdown of enterprises and disrupted mechanism of product sales, so spot prices for milk in this period can be considered tentative.
As dairy industry analyst Maxim Fasteev said in his Telegram channel, the massive rocket attacks on Ukraine once again show how important the factor of generators availability at the enterprises is now, and this factor will be relevant in the coming months as well.
“Some Ukrainian plants, as well as the population, were left without electricity for almost a day, milk trucks, in some cases, are still waiting for unloading of raw milk (it is good that at least the air temperature helps to preserve the quality of the goods). There is no possibility to resell raw milk, because all processors are in the same conditions. This is all the consequences of another wave of missile strikes of the terrorist country (already officially) on the Ukrainian civil infrastructure,” the expert wrote.
According to his data, milk processing companies continue to meet their obligations on the levels of procurement prices, but in the secondary market is not an issue of value now, because demand for the product is completely absent. Thus, the current spot price of raw milk in Ukraine can be considered conditional.
“Ukrainian exchange commodity prices in the domestic market remain under pressure from lower export (European) quotes, but there are no changes in the skimmed milk powder (SOM)/oil equivalent compared to last week due to the moderate strengthening of the hryvnia against the euro,” the analyst specified in the report.
In addition, last week the spot price of Ukrainian raw milk compared to the EU products was by 38% lower, while during the previous week this indicator was 34%, and the difference of milk equivalents (EM) of REM / butter was 21% (in the previous week -23%).
The expert reminded that the indicator of milk equivalent (EM) – recalculation of the current (spot) cost of dairy commodities in the equivalent of a basic kilogram of raw milk, taking into account the costs and standards of production of these goods.
A cost of raw milk produced in Ukraine is constantly rising under the influence of a number of factors, while the purchase prices for it have fallen since the beginning of Russia’s military invasion of Ukraine, the Association of Milk Producers (AMP) said.
In its analysis of the milk market, published on the website of the association, it is noted that although this situation creates pressure on the market, however, since the second decade of April, it has been developing “in the tones of very restrained optimism.”
According to it, the average purchase prices for milk as of April 20 are: extra-class – UAH 10.13/kg, top-class – UAH 9.88/kg, and first-class – UAH 9.40/kg (excluding VAT). At the same time, in the country they fluctuate in the range of UAH 9.5-10.7 /kg (excluding VAT) for extra-class raw milk.
The association notes that the cost of milk production is constantly growing, which is influenced by several reasons at once. Since the beginning of Russian aggression in Ukraine, prices for fuel and veterinary drugs have increased significantly, and the blockade of the export of agricultural products from Ukrainian seaports deprives agribusiness of working capital, the report explains. In addition, in March, due to the war, the cost of milk was affected by a forced revision of the feed ration of cows, changes in the structure of the payment of wages to staff, as well as the transfer of part of milk free of charge in the form of humanitarian aid.
According to AMP, the issue of raw milk cost “so far looks like a snowball that accumulates in the absence of a sufficient level of purchase prices.”
The association assumes that in the near future the milk market in the country will develop under the pressure of the following factors: the nature and intensity of hostilities, the possibility of unblocking seaports and resolving issues of exporting dairy products.
“The market began to feel the demand for dairy products and improved sales conditions in the occupied areas. With the increase of demand and sales, we see an increase in the supply of raw milk. Of course, these are not pre-war prices, but not the prices of the first weeks of UAH 8,” AMP said.
The State Service on Food Safety and Consumer Protection has agreed with Libyan experts on the form of an export veterinary certificate for the supply of milk and dairy products, the State Food Service said in a press release.
“Less than two weeks ago, a very productive meeting with the Charge d’Affaires of Libya in Ukraine, Adel Benissa, took place at the State Food and Consumer Protection Service, and today we have very good news for Ukrainian dairy producers about the opening of the export market,” head of the agency Vladyslava Mahaletska said.
She clarified that the possibility of exporting sunflower oil, grain, fruit and berry products from Ukraine to Libya is being considered. The forms of international veterinary certificates for the export of cattle, poultry and products from it have already been agreed.
As reported, Ukraine in April agreed with Argentina the form of an export veterinary certificate for the supply of milk and dairy products to this country.
Ukrainian agricultural products in 2020 gained access to the markets of 12 countries. Some 35 export certificates have been agreed, two EU audits have been passed concerning state control over the production of fish, poultry and products made of them.
According to the State Consumer Service, in 2021, work continues to expand exports in various commodity items, including poultry, livestock, beef and pork, milk and dairy products, honey, apples, blueberries and cherries, legumes, onions, wheat flour, fish and fish products, reproductive material.
