Milk price growth in Ukraine expected to slow in Dec due to decreased domestic demand

The increase in raw milk prices during the second half of November was driven by growing interest from European traders in Ukrainian butter. However, declining domestic demand for dairy products is likely to stabilize prices in the latter half of December, according to the Association of Milk Producers (AMP).

As of November 20, analysts report that the average purchase price for premium-grade raw milk rose by UAH 1 per kilogram to UAH 19.40/kg (excluding VAT). First-grade milk increased by UAH 1.20/kg to UAH 18.65/kg (excluding VAT), and second-grade milk rose by UAH 1/kg to UAH 17.70/kg (excluding VAT).

The weighted average price across the three grades reached UAH 18.58/kg, UAH 1.07 higher than the previous month.

AMP analyst Heorhii Kukhaleyshvili explained that the price hike for raw milk was influenced by heightened demand for butter in foreign markets during November.

"With the price of New Zealand butter reaching $7,000 per tonne, European traders turned to Ukrainian producers for more competitively priced alternatives. After a slight dip in demand for exchange-traded commodities at the start of the month, interest in butter and cheese on foreign markets is now increasing," the expert noted.

At the same time, AMP highlighted a drop in November demand for raw milk from Ukrainian dairy processors compared to September-October levels. This has slowed the pace of price growth, reflecting reduced consumer demand for dairy products in the domestic market.

"Ukrainian consumers with below-average incomes are beginning to forgo dairy products due to rising prices – not only for dairy items but also for other foods. Spread consumption is increasing in the country as a cheaper alternative to butter," the association observed.

High prices for finished dairy products and difficulties in selling them domestically are holding back further increases in raw milk prices. Under these conditions, AMP forecasts a modest rise in purchase prices in early December, followed by stabilization in the second half of the month.