Prices for farm-gate milk in Ukraine have fallen significantly, yet this has had almost no impact on the cost of dairy products in shops. According to ‘Ekonomichna Pravda’, the difference between the ‘farm gate’ price and the ‘shelf’ price creates a complex margin structure between producers, processors and retailers.

Falling milk prices and farm losses

In recent months, Ukrainian milk producers have found themselves in a situation where selling their raw milk is effectively resulting in losses. Purchase prices have fallen so much that some farms are being forced to cut costs and put development plans on hold.

The fall in prices began at the end of the fourth quarter of 2025 and was driven by global factors: a collapse in prices for dairy products on the commodities market (primarily butter and milk powder), overproduction of raw materials, and a decline in demand. As around a third of milk in Ukraine is used for the production of export goods, global trends had a direct impact on the domestic market.

In January–February 2026, purchase prices were on average 24% lower than a year earlier. At the beginning of March, the average price stood at 13.5 UAH per kg excluding VAT, which is below the production cost (15–16 UAH).

The Association of Milk Producers notes that dairy farming has become ‘a business that does not generate income but incurs losses’.

Farms with herds of up to 500 cows, which have less financial resilience, are feeling the greatest pressure. Such farms account for around 20% of milk production in Ukraine.

If the situation does not change, the country could lose up to 800,000 tonnes of milk by the end of the year and go from being an exporter to an importer.

The decline in profitability is already having an impact on livestock numbers: whilst the herd grew by 19,000 head in 2025, it shrank by 1,000 head in February 2026 alone.

Why aren’t prices falling?

Despite the fall in the cost of raw materials, retail prices for dairy products are not only failing to fall but are actually rising.

At the end of March:

  • “Yagotynske” milk (900 ml) cost 57.78 UAH, compared with 54.4 UAH in February;
  • ‘Selianske’ butter (200 g) — 113.39 UAH compared to 110.55 UAH.

Since December 2025, the price of dairy products has risen by an average of 2.5%.

The position of processors

Processors also attribute the low purchase prices to global factors — overproduction and falling demand.

At the same time, Arsen Didur, Executive Director of the Ukrainian Dairy Industry Association, describes claims of widespread losses among farmers as “little more than a political slogan”.

According to him, the Ukrainian market has long been operating ‘in promotion mode’: up to 80% of manufacturers sell their products through promotional offers. Shoppers are driven not by brand loyalty but by discounts.

Processors also point to the retail sector as the key recipient of margins. Didur describes the retail sector as the ‘main beneficiary of profits from farm to shelf’.

He explains that:

  • Formally, the prices in the contracts remain unchanged;
  • but the networks are demanding an increase in their shareholding;
  • The discounts are effectively funded by the supplier.

As a result, the retailer retains its mark-up, whilst the processor loses part of its revenue.

In addition, retailers generate additional revenue through marketing fees, shelf space charges, logistics and refrigeration costs, and they also delay payments: around 25% of their debts to manufacturers are overdue.

At the same time, even under such conditions, processors are not operating at a loss — profitability in the consumer segments stands at up to 8%.

What the retail chains are saying

The editorial team contacted the largest supermarket chains — ATB, Silpo, Novus and Varus — to ask about their pricing policies.

ATB and Novus did not initially respond, whilst Silpo declined to comment. Only the Varus chain provided a full response.

Varus stated that suppliers had not reduced their prices for finished goods, so there were no grounds for lowering the base retail prices.

“At the same time, the final price for consumers fell during the promotional period – by approximately 10–15% compared with the first quarter of 2025,” said a spokesperson for the chain.

Following the publication of the article, Novus also sent a response. They too mention selective price reductions (of up to 10% on butter) and deny that they are charging excessive margins.

Retail chains emphasise that the price is determined not only by the purchase cost, but also by the costs of logistics, refrigeration, energy and other operational processes.

According to them, the promotions are funded jointly with suppliers.

Where is the margin?

Farmers and processors agree on one thing: the retail sector is the strongest link in the pricing chain.

According to industry representatives, in some cases the difference is significant: cheese that a factory sells for 300 UAH per kg may cost over 500 UAH in a shop.

At the same time, retailers deny that such mark-ups are systematic, attributing the prices to fierce competition and low profit margins in the sector.

Source: Ekonomichna Pravda