The decline in global commodity prices in export markets, increased supply of dairy products in warehouses, and weak demand from milk processing enterprises are contributing to a reduction in raw milk prices, according to Georghii Kukhaleishvili, analyst at the Association of Milk Producers (AMP).
The average procurement price for Extra Grade milk as of October 22 was 17.25 UAH/kg excluding VAT, which is 20 kopecks less than the previous month. The price range for this grade on farms varies from 16.90 to 18.00 UAH/kg excluding VAT.
Higher Grade milk costs 17.00 UAH/kg excluding VAT on average, which is 15 kopecks less than the previous month. Prices for Higher Grade milk fluctuate from 16.80 to 17.10 UAH/kg excluding VAT.
The average price for First Grade milk was 16.65 UAH/kg excluding VAT and decreased by 15 kopecks compared to the previous month. The minimum price on farms was 16.50 UAH/kg and has not changed over the last month. The maximum price was 17.00 UAH/kg.
Accordingly, the weighted average price of the three grades was 17.17 UAH/kg excluding VAT, which is 18 kopecks less than the previous month.
Georghii Kukhaleishvili notes that the decrease in raw milk prices in Ukraine is occurring due to low demand from milk processing enterprises resulting from reduced sales of commodity products, due to the unprofitability of the skim milk powder/butter pair and the decline in global butter prices. The price decrease for milk and dairy products is currently a global trend, which is an atypical situation for the end of the year.
Increased milk yields in New Zealand, the US, and Latin America have led to a sharp accumulation of butter in warehouses and a subsequent drop in its price. The weakening of milk powder prices was caused by weaker demand in importing regions, and the decline in cheese prices is associated with stable production in the EU and weakening export demand. Thus, surpluses of commodity goods have formed on the world market. Analysts note that this year's milk yields exceed the export markets' capacity to absorb them, despite increasing demand for dairy products in developing countries.
The signing of the agreement on October 14 by the European Commission and the government of Ukraine to increase quotas for the export of Ukrainian products does not fundamentally change the situation for Ukrainian dairy farmers yet, as local traders are not interested in importing Ukrainian dairy products under conditions of low butter and milk powder prices in Europe. According to the new agreement, quotas for condensed milk and cream increase from 10 to 15 thousand tonnes, for butter from 3 to 7 thousand tonnes, for skimmed milk powder from 5 to 15.4 thousand tonnes, and quotas for whole milk products, yogurts, kefir, other fermented products, whole milk powder, cheeses, and whey are cancelled. Ukraine exports negligible volumes of the dairy products for which quotas will no longer apply, indicating the necessity of increasing supply volumes and entering new markets.
From November 1st, a further reduction in raw milk prices is to be expected in Ukraine, especially on farms where prices are in the maximum corridor. It is likely that significant dairy product surpluses in warehouses in the US and EU will be sold off over the next six months, and then, around spring, positive changes in the dairy market are probable.
Press service of the Association of Milk Producers
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