Rising costs and weak milk prices accelerate cow sell-offs in Ukraine
Ukraine’s household dairy farms are reducing their herds as production costs rise faster than raw milk purchase prices. Household cow numbers fell 29% over the past year, while exports of live cattle increased 11.5% from the beginning of the year.
Household farms lose ground
Ukraine’s small dairy producers are under growing pressure as the cost of producing milk rises faster than the prices paid by processors. Household farms still keep more than half of the country’s cows, making their retreat a significant risk for the domestic raw milk supply.
Data from the Association of Milk Producers cited by 24 Kanal show that household farms held 544,600 cows as of July 1, compared with 396,600 cows in the industrial sector. Over the preceding year, the number of cows at agricultural enterprises increased by 4%, while the household herd contracted by 29%. The figures point to a widening divide between larger, more organized producers and small suppliers with limited financial protection.
Purchase prices approach production costs
Ivan Svynous of the Institute of Agrarian Economics forecast that the August purchase price for second-grade milk could decline to 9.16 hryvnias per kilogram, 1.1% below the June level. This category is particularly relevant to household producers. At agricultural enterprises, meanwhile, purchase prices have moved close to production costs, leaving little room to absorb further increases in expenses.
Higher feed, energy, fuel and labor costs are raising the cost of keeping dairy cattle. Processors’ ability to pay more is constrained by weak consumer purchasing power, movements in the dollar and euro exchange rates, export conditions and additional wartime costs and risks. Long payment periods used by retail chains also affect suppliers by transferring part of retailers’ financial risk to producers and processors.
Seasonality creates another layer of price pressure. Green feed raises milk yields and supply during spring and early summer, traditionally limiting purchase-price growth. Supply gradually declines toward the end of summer while herd maintenance becomes more expensive, creating conditions for prices to recover. Svynous expects a moderate August increase in the prices paid for milk delivered by agricultural enterprises, even as second-grade milk supplied by households may become cheaper.
High beef prices encourage herd liquidation
Low raw milk prices and rising costs are encouraging farmers to sell cattle while beef prices remain high in export markets. Ukraine increased exports of live cattle by 11.5% from the beginning of the year, according to 24 Kanal. The immediate sale provides cash to farmers, but continued herd liquidation reduces future milk output and makes rebuilding supply dependent on costly herd replacement.
Georgiy Kukhiashvili, an analyst at the Association of Milk Producers, warned that small farms could disappear from the market unless Ukraine modernizes milk-processing plants for deeper processing by 2035 and raises the prices paid for milk. Export uncertainty concerning the EU and seasonally weaker domestic demand remain risks. Support could come from declining supplies of quality raw milk and foreign demand for certain Ukrainian dairy products.
Proposed measures include shorter payment periods for suppliers, a fairer allocation of financial risk among producers, processors and retailers, and expanded state purchases of Ukrainian dairy products for the Armed Forces and public institutions. War remains an additional driver of herd reductions: farms in eastern and southern regions have culled or relocated cattle to safer areas in central and western Ukraine, while other producers have postponed herd renewal.
