VASYL VINTONYAK, Director Infagro: The shortage of raw milk has dramatically changed the balance in foreign dairy trade

Previously, Ukrainian dairies had significant surpluses of raw milk in the summer and could use it for exports aimed production.  This year the situation has radically changed.  As early as in mid-summer, exports of dairy products began to fall sharply despite the relatively high prices on the world dairy market.  At the same time, there is a marked increase in imports, which was previously characteristic only of the off-season.

The decline in exports in August was primarily due to a significant reduction in supply of raw milk from households, from which most companies produce export-oriented milk powder, casein or cheese products paired with butter.  Production of these products decreased, in addition, domestic prices rose significantly.  This is mostly the case for the dairy commodities and many processors are making strategic stocks, realizing that there will be a shortage of fresh raw materials in the 21/22 off-season.

As a result, in August, compared to the same month last year, exports of skimmed milk powder fell twice (to 725 tons), butter and whey – by almost a quarter, to 600 tons and 1.4 thousand tons, respectively. Exports of cheese, canned milk and even casein, whose export prices are at a record high for the last 8 years, also decreased significantly.

In the autumn months, export sales will be even more modest.

In parallel with the fall in exports, there is an even more significant increase in dairy imports.  Apart from the steady growth of purchases of cheese or fresh dairy products that unfortunately everyone is used to, now the interest in purchasing commodities – butter, milk powder and even whey – has grown significantly.  In August this year, it was impirted 7.3 times more butter than last year (1.4 thousand tons), purchases of milk powder increased almost 7 times to 1.3 thousand tons and whey by 48%.

This does not mean that there is a shortage of these goods in Ukraine right now.  Prudent importers buy goods either for the future, realizing that due to lack of raw milk they will be too expensive later, or because imported goods for consumers are cheaper than domestic ones.

It was quite profitable to buy milk powder and whey from Belarusians, but butter, despite there is an import duty on this product, enters our market mostly from the EU.  Imports of these commodity items will also increase in autumn, although growth rates may slow down as these products become more expensive on the world markets.

Given such negative statistics, many market participants will shout “save the industry!”.  But this is the market.  And in the current situation in Ukraine, there are not so many ways out of the situation.  It is better to buy raw milk abroad than to observe the increase in imports of finished products (cheese or fresh dairy products) or to agree to a constant, significant and not always justified increase in milk prices set by farmers.

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