Price decline and signs of stabilization in the Ukrainian dairy market

In the first half of March, Ukraine observed a further decline in purchase prices for raw milk. Despite the high level of supply of both raw and finished dairy products on the domestic market, demand remains weak. However, the second half of the month shows the first signs of price stabilization.

According to the Association of Milk Producers, the average purchase price of extra-grade milk was 16.55 UAH/kg excluding VAT - 25 kopecks less than a month ago. In farms, prices range from 15.70 to 16.70 UAH/kg excluding VAT: the lower limit fell by 80 kopecks, and the upper limit by 1.30 UAH.

As for premium milk, the average price was fixed at 16.30 UAH/kg excluding VAT, which is 35 kopecks lower than the previous figure. The price range for this type of milk is from 15.50 to 16.50 UAH/kg excluding VAT. Compared to the first half of last month, the lower limit decreased by 70 kopecks, and the upper limit decreased by 1.00 UAH.

First-grade milk has an average purchase price of 15.85 UAH/kg excluding VAT, which is a decrease of 15 kopecks compared to the first half of last month. The minimum price at farms was 15.00 UAH/kg (a decrease of 1.00 UAH), and the maximum was 16.20 UAH/kg (a decrease of 80 kopecks). Overall, the weighted average price for all three grades was 16.40 UAH/kg excluding VAT, which is 25 kopecks less compared to the previous period.

Analyst of the Milk Producers Association, Georgy Kukhaleishvili, explains that the decline in raw milk prices in March is due to excess supply and weak demand in the domestic market. This creates additional pressure on purchase prices, and the difference between different grades is gradually decreasing.

It is also worth noting that the price increase in the fourth quarter of 2024 was completely wiped out, and the profitability of exchange-traded goods has fallen sharply. The production of butter, powdered milk and casein is currently unprofitable. One of the reasons for the decline in purchase prices is the low technological base of dairy processing enterprises. Over the past decade, enterprises have not been able to adapt to working with more expensive milk from dairy farms.

Most dairies need modernization due to the lack of modern deep processing technologies. Although they use high-quality extra-grade milk, the production technology is based on the same yield standards as for first-grade milk. Outdated equipment is energy-intensive, which leads to an increase in the cost of production.

Despite the current decline in prices, some processors are stimulating demand through discounts and promotions. The ice cream season and the growth of canned milk exports contribute to an increase in raw material processing, which may affect the further stabilization of purchase prices in the second half of March.

The price situation on the dairy market also remains vulnerable to external factors. Uncertainty on the global market, the impact of the US trade war, which has caused warehouse overflows and a decrease in prices in the American dairy industry, may increase competition in the markets of Asia and Africa. An additional threat for Ukraine is the spread of foot-and-mouth disease in Hungary, which has already led to a temporary ban on the import of livestock products from this country.