The situation on the Ukrainian butter market is deteriorating after active summer exports, company warehouses are filling up, domestic sales are becoming increasingly difficult, and exports are facing additional challenges, according to industry analytical agency Infagro.
“Currently, only those producers who are willing to significantly reduce prices can sell their products consistently. These are usually companies that lack working capital. However, the current price level is unprofitable for most producers operating in the butter segment, along with skimmed milk powder or casein,” analysts explained.
They pointed out that due to the rise in raw material prices, production is becoming less profitable: the purchase prices for milk required to break even remain unattainable for most companies.
At the same time, at the end of October, there was a noticeable decrease in the price of block butter, while manufacturers of packaged products are in a slightly better position, but competition in this market is intensifying.
To increase sales, companies are forced to offer promotional discounts, which negatively affects profitability.
“The situation with exports is also difficult. Some companies are lowering prices to stay in foreign markets, particularly in Moldova. Demand for Ukrainian butter in the Caucasus remains, but sales volumes there are limited,” experts noted.
According to their information, expectations of additional opportunities after the introduction of new duty-free quotas to the EU have not been met—demand from European traders is accompanied by lower price offers that do not cover production costs.
Due to the unprofitability of production, some factories have already reduced or temporarily suspended butter production. As a result, production volumes in October were lower than last year, which is the first such case in recent times, Infagro concluded.
