Rising Tide of Raw Milk Prices in Ukraine: Challenges Amidst Increasing Demand and Limited Supply
Source: The DairyNews
As of December 17, 2023, raw milk in Ukraine has increased on average by 34 kopecks (+2.4%) compared to November 25.
The cost of raw milk continues to rise due to limited supply in the domestic market. In December, producers of fresh dairy products and cheesemakers experienced a shortage of raw materials, as demand for dairy products intensified before Christmas and New Year's, according to Georgiy Kukhaleyshvili, an analyst at the Milk Producers Association.
The average purchase price of extra-grade milk as of December 17 was 14.61 UAH/kg* excluding VAT, which is 31 kopecks higher than a month ago. The price range for this grade on farms varies from 14 to 15 UAH/kg excluding VAT. The lower and upper limits of the price range have increased by 20 kopecks in the last month.
Higher-grade milk costs an average of 14.61 UAH/kg excluding VAT. In the last month, the price for this grade has increased by 31 kopecks. Prices for higher-grade milk range from 14 to 15 UAH/kg excluding VAT. The lower and upper limits of the price range have increased by 20 kopecks.
The average price of first-grade milk was 13.54 UAH/kg excluding VAT, increasing by 39 kopecks compared to the previous monitoring results. The minimum price on farms was 12.92 UAH/kg, rising by 12 kopecks in the last month. The maximum price for the first grade was 14.28 UAH/kg, which is 78 kopecks higher than the monitoring results on November 25.
Consequently, the average weighted price of the three grades was 14.25 UAH/kg excluding VAT, increasing by 34 kopecks.
Georgiy Kukhaleyshvili notes that in December, purchase prices continued to rise compared to November amid limited supply of raw milk in the domestic market and active demand from cheesemakers and producers of fresh dairy products ahead of the New Year holidays. Although industrial farms restored lost productivity during November-December 2023 and even demonstrated growth after the abnormal summer heat, dairy processing enterprises were unable to adequately prepare for the autumn-winter sales period, producing fewer exchange goods than usual.
The volume and share of raw milk from households continue to rapidly decrease, contributing to the preservation of a raw material deficit in the market, which currently cannot compensate for the industrial sector.
Meanwhile, in 2023, milk product consumption increased in Ukraine, as approximately 1 million citizens returned to the country from abroad, according to the International Organization for Migration. Therefore, the upward trend in milk purchase prices continues due to active demand for dairy products from the population and a deficit of raw milk within the country.
On the other hand, to curb further price increases for raw milk, it may be possible to slow down orders from retailers, as market activity traditionally declines after Christmas and New Year celebrations. The stabilization of raw material prices is possible in case of an increase in imports of cheeses, butter, and cream to Ukraine. In such a scenario, imported dairy products will fill the warehouses, saturate the domestic market, and demand for raw milk from Ukrainian processors will stabilize. On the other hand, we are currently observing an increase in the exchange rate of the dollar and euro, which makes imported products more expensive. In such conditions, the export of dairy products may increase, contributing to both a sideways movement in raw milk prices and some growth.
* 1 USD = 37,98 UAH
The average purchase price of extra-grade milk as of December 17 was 14.61 UAH/kg* excluding VAT, which is 31 kopecks higher than a month ago. The price range for this grade on farms varies from 14 to 15 UAH/kg excluding VAT. The lower and upper limits of the price range have increased by 20 kopecks in the last month.
Higher-grade milk costs an average of 14.61 UAH/kg excluding VAT. In the last month, the price for this grade has increased by 31 kopecks. Prices for higher-grade milk range from 14 to 15 UAH/kg excluding VAT. The lower and upper limits of the price range have increased by 20 kopecks.
The average price of first-grade milk was 13.54 UAH/kg excluding VAT, increasing by 39 kopecks compared to the previous monitoring results. The minimum price on farms was 12.92 UAH/kg, rising by 12 kopecks in the last month. The maximum price for the first grade was 14.28 UAH/kg, which is 78 kopecks higher than the monitoring results on November 25.
Consequently, the average weighted price of the three grades was 14.25 UAH/kg excluding VAT, increasing by 34 kopecks.
Georgiy Kukhaleyshvili notes that in December, purchase prices continued to rise compared to November amid limited supply of raw milk in the domestic market and active demand from cheesemakers and producers of fresh dairy products ahead of the New Year holidays. Although industrial farms restored lost productivity during November-December 2023 and even demonstrated growth after the abnormal summer heat, dairy processing enterprises were unable to adequately prepare for the autumn-winter sales period, producing fewer exchange goods than usual.
The volume and share of raw milk from households continue to rapidly decrease, contributing to the preservation of a raw material deficit in the market, which currently cannot compensate for the industrial sector.
Meanwhile, in 2023, milk product consumption increased in Ukraine, as approximately 1 million citizens returned to the country from abroad, according to the International Organization for Migration. Therefore, the upward trend in milk purchase prices continues due to active demand for dairy products from the population and a deficit of raw milk within the country.
On the other hand, to curb further price increases for raw milk, it may be possible to slow down orders from retailers, as market activity traditionally declines after Christmas and New Year celebrations. The stabilization of raw material prices is possible in case of an increase in imports of cheeses, butter, and cream to Ukraine. In such a scenario, imported dairy products will fill the warehouses, saturate the domestic market, and demand for raw milk from Ukrainian processors will stabilize. On the other hand, we are currently observing an increase in the exchange rate of the dollar and euro, which makes imported products more expensive. In such conditions, the export of dairy products may increase, contributing to both a sideways movement in raw milk prices and some growth.
* 1 USD = 37,98 UAH
