The Ukrainian Butter Market Faces Price Declines and Production Cuts

The situation in the butter market in Ukraine continues to worsen: after active exports in the summer, producers’ warehouses are filling up, and domestic sales of the product are becoming increasingly problematic. Export operations are also facing new challenges.

This is reported by AgroReview

Price Declines and Losses for Producers

Under current conditions, only those companies that agree to significant price reductions can consistently sell butter. Typically, these are businesses with a shortage of working capital. However, the current price level is unprofitable for most producers, who operate not only in the butter sector but also in related areas such as skimmed milk powder and casein.

Butter production is becoming increasingly less profitable due to rising prices for dairy raw materials. The purchase prices for milk necessary to ensure break-even operations remain unattainable for most enterprises.

Export and Domestic Market: New Difficulties

At the end of October, a noticeable drop in block butter prices was observed. Meanwhile, producers of packaged products maintain somewhat better market positions, although competition in this segment is intensifying. To stimulate sales, companies are forced to organize promotional discounts, which negatively impacts business profitability.

Expectations for additional opportunities following the introduction of new duty-free quotas to the EU have not materialized — the demand from European traders is accompanied by lower price offers that do not cover production costs.

The situation in export markets also remains challenging. Some enterprises are forced to lower prices to stay competitive in external markets, particularly in Moldova. Demand for Ukrainian butter in the Caucasus remains, but sales volumes there are limited.

Due to production losses, some factories have already reduced or temporarily suspended butter production. As a result, production volumes in October were lower than in the corresponding period of the previous year — this is the first such occurrence in recent times.