Butter production in Ukraine has become unprofitable

Georgy Kukhaleyishvili, an analyst at the Association of Milk Producers, stated that butter production in Ukraine has become unprofitable. This happened due to the inability of dairy plants to switch to milk from farms, as most dairy plants have not implemented modern milk processing technologies and require modernization.  

In fact, enterprises receive "extra" grade milk, with better quality and higher cost, but produce finished products from it as if it were first-grade milk, which has a lower quality. In addition, outdated equipment at milk processing enterprises is energy-intensive, which affects the increase in the cost of production of finished products.

As the expert noted, at the beginning of March, due to the high supply of raw milk and low demand for finished products in the domestic market, prices for raw milk decreased. Therefore, the profitability of production of goods is decreasing, and the production of butter, dry milk and casein has generally become unprofitable. At the same time, surplus raw materials are putting pressure on purchase prices, and the effect of the increase in the price of raw milk, which occurred in the fourth quarter of 2024, is completely nullified.

It is worth mentioning that the European Union became interested in Ukrainian butter last year. This happened in the second half of November, when prices for raw milk increased in Ukraine against the background of the growing interest of European traders in domestic butter. But in December, the average purchase price of "extra" grade milk was UAH 19.7 per kg excluding VAT. Less and less milk was being supplied for processing from households, but the factories that produce butter and dry milk were not ready to buy milk at current high prices, taking into account the fact that butter prices in Europe had significantly decreased. Therefore, given the current price of raw milk in Ukraine, a repeat of the situation in 2023 is likely, when domestic companies began to import butter for sale on the domestic market, which helped to stop the growth of prices for raw milk. A similar scenario may await cheese makers as well. After all, European producers receive subsidies, and their production costs are lower than those of domestic cheese makers. Therefore, European cheeses are cheaper and Ukrainian retail chains have begun to actively import them.