The purchase price of milk is something that milk producers and processors are always debating. Usually, only the volume of supply and the price of milk are discussed. The fat and protein content of the milk that will be processed are of little concern to processors. This is wrong. After all, the outcome of the finished products and the profit of the processor depend on that.
Earlier, in the interviews with various agrarian media, I have already mentioned the significant differences in the normative values of these indicators in Ukraine and EU countries. Let me remind you once again:
Ukraine: fat 3.4%, protein 3.0%
France: fat 3.8%, protein 3.2%
Germany: fat 4.0%, protein 3.3%
Netherlands: fat 4.2%, protein 3.4%
In Ukraine, the actual average annual fat content in commercial milk is 3.7%, and protein is 3.2%. And these indicators could be much higher. High values can be achieved due to better feeding and housing conditions, genetics.
What provides milk producers a higher fat and protein content in milk? If we take the average purchase price of UAH 11,000/t, without VAT and based on basic indicators, then for an additional 0.1% of fat, the farm would receive UAH 129.4 in gross income for each ton of the milk sold. If Ukrainian farmers reach the average value of the Dutch fat/protein indicators, they will receive more than UAH 2 billion every year for additional milk fat and about the same amount for additional protein.
What does the increased fat content mean to a milk processor? Taking into account the fact that all agricultural enterprises of Ukraine produce about 2.5 million tons of marketable milk every year, the difference in the amount of milk fat, which will be received by processors with the mentioned increase in fat content, will be about 17 thousand tons every year. And this is an additional 20,000 tons of butter with the same transport and processing costs!
The question arises: if everyone wins, then why is this topic actually out of attention of both milk producers and processors?
In my opinion, just milk processors can drive change by creating a proper demand. That is, in negotiations for the purchase of milk, milk processors can voice their requirements regarding the level of fat and protein content, having previously calculated the benefit that both the dairy itself and its partners – suppliers of milk – will receive. Meeting these requirements is quite realistic. The processor’s understanding of the benefits of purchasing raw milk with significantly higher fat and protein content will create demand in the market and become an incentive for improving the efficiency of suppliers’ dairy farms. This will give impetus to qualitative changes in the country’s dairy industry and bring Ukrainian domestic standards closer to the European level.