Despite the season, milk purchase prices remain high

The positive forecasts of milk processors for May did not come true - according to the results of spring, purchase prices remained at high levels. – PioneerProduct

Over the past month, it was only possible to slightly reduce the prices of milk produced in the households of the population and lower the lower limit of the price of first-grade milk from the category of agricultural enterprises. The price level of quality milk remained unchanged.

For the last 6 months, the cost of raw materials in Ukraine has been the most stable in history. If we analyze the dynamics of the average price of milk of agricultural enterprises, then without taking into account the change in VAT, from December to May, price fluctuations remained within the limits of only 5-10 kopecks. Due to high purchase prices, the profitability of dairy production is currently low for operators working with both commodities and finished products.

At the same time, for producers of raw materials, the purchase prices of milk at the moment are not good enough even to cover the costs. Milk production operating margin is again near zero.

On May 25, at the Dairy Business conference, market participants discussed how dramatically the simultaneous low marginality of milk production and processing increases the likelihood of bankruptcies, purchases, sales, mergers and acquisitions in the dairy industry.

Official statistics indicate a stable level of milk production by agricultural enterprises in April and in general for four months. If it weren’t for a significant rise in the cost of feed and, accordingly, a deterioration in rations, with the current dynamics of the livestock in the category (only -1.3% compared to last year), we would now surely observe an increase in the supply of quality milk.

At the same time, the volumes of milk production by households are declining at the expected maximum rate (-7.6%). The expected reduction in the supply of household milk in June may stimulate the growth of the cost of raw materials and accelerate the process of changing the composition of market participants.

PioneerProduct