Prices are falling, costs are rising: how global trends are affecting Ukrainian milk producers
30 January 15:33
A number of Ukrainian milk producers have warned of the risk of farms suspending operations due to another drop in purchase prices. Industry associations cite pressure from several factors, ranging from power supply disruptions to difficulties in selling finished products and competition from imports. At the same time, some farms are still waiting for signs of a possible market recovery in the spring.
Latifundist .com reports on the situation with reference to market participants, according to "Komersant Ukrainian".
What happened
In early February, processing plants announced a new reduction in purchase prices for raw milk. According to Anna Lavrenyuk, CEO of the Milk Producers Association, the price has decreased by 0.5–1 UAH/kg, and the price range for extra-grade milk has fallen to 13.5–14 UAH/kg.
Some companies are also reducing their purchase volumes. The reasons cited are power outages, difficulties in selling dairy products, and an increase in the share of imported goods in retail chains.
Why prices are falling
The industry cites a combination of domestic and global factors. Lavrenyuk notes that the decline in the price of raw milk is part of a global trend—the market is experiencing its deepest crisis in three decades, which has affected key production regions in Europe, America, and New Zealand.
In Ukraine, the situation is complicated by:
- interruptions in energy supply, which increase production costs;
- a decline in the purchasing power of the population;
- competition from cheaper dairy imports from the EU;
- a reduction in processing volumes at factories.
Risk of farm closures
Some small and medium-sized farms are considering temporarily suspending operations. According to Lavrenyuk, some farms are waiting until March — if there are no positive signals from the market, they may refuse to sow corn for silage, use feed residues, and stop production.
The economics of losses
Dmytro Solomakha, director of the Peremoha agricultural cooperative in Cherkasy region, talks about the financial pressure. According to him, since February 1, the purchase price has been 14 UAH/kg excluding VAT, while the production cost is 15.3 UAH/kg.
According to the farm’s calculations, daily losses amount to 36,000 UAH, and monthly losses may exceed one million. If the price drops to 12 UAH/kg, losses will triple to 90,000 UAH per day.
As of January 20, the average purchase price of milk was 14.35 UAH/kg excluding VAT, which is 85 kopecks less than a month earlier. For comparison, in December this figure was 15.80 UAH/kg.
Possible anti-crisis measures include:
- cost cutting and postponement of investments,
- increasing the workload on employees,
- partial unpaid leave,
- culling of low-yielding livestock,
- restricting lending.
Industry associations expect that demand for milk proteins will not recover until autumn 2026 at the earliest. At the same time, industry organizations had previously forecast an increase in milk production in 2025 to over 3.6 million tons, which may now be revised in light of the market situation.
Imports are creating additional pressure: Ukrainian cheese producers are already cutting back on production due to increased competition from cheaper European products.
