Ukraine's Dairy Market: Export Revenue Declines Amid Rising Costs and Structural Imbalances

The key factor in the worsening financial results is the decline in revenue fr om the export of basic dairy products:

• butter
• skimmed milk powder

Despite stable raw material prices, rising costs—primarily for energy resources and logistics—are leading to reduced profitability of supplies.

According to analysts, the current level of purchase prices for milk remains economically justified, and their stability is expected in the short term.

Production: Growth in Industrial Segment and Decline in Private Sector

The production structure shows increasing imbalance:

• the livestock population in agricultural enterprises increased by 5% (to 395,000 heads), and production grew by 4.3%;
• in households, the livestock population decreased by 28%, and production by 25%.

Thus, the industry is rapidly transitioning from a small-scale model to an industrial one, but the overall supply of raw materials is decreasing.

Processing Grows, but Raw Materials Are Scarce

Despite the reduction in overall production, processing enterprises are increasing their load:

• 522,000 tons of milk were processed in January–February, which is above last year's level.

This intensifies competition for raw materials and creates additional pressure on the market.

Small Farms Operating at a Loss

The financial stability in the industry is extremely unevenly distributed:

• small farms are operating on the verge of loss;
• only highly efficient enterprises remain profitable.

Reducing costs, including for feed, is already leading to a slowdown in herd productivity growth.

Additional pressure is confirmed by the situation on the domestic market: purchase prices for milk remain below cost, making production unprofitable for some farmers.

Weak Domestic Demand, Focus on Exports

Weak domestic consumption forces producers to focus on external markets to balance the industry. Priority is given to high value-added products, however:

• entering new markets takes time;
• the current price conditions lim it export profitability.

Deep-Rooted Issue: Gap Between Raw Material and Shelf

One of the key structural problems remains the gap between raw material prices and retail product prices:

• purchase prices for milk are decreasing;
• retail prices for dairy products continue to rise.

This indicates a redistribution of margin within the chain—from farmers to processing and especially to retail, which, according to market participants, remains the main beneficiary.