After a breakthrough in the European market, Ukraine’s dairy industry is now trapped by new quotas and tariffs. The state may need to act quickly to prevent processing plants from halting operations, reports Baltimore Chronicle.
A year ago, the Ukrainian dairy industry was experiencing a surge: after the opening of the European Union market in 2022, exports to EU countries grew 14-fold, making the bloc the country’s largest trading partner.
Duty-free access to EU consumers allowed dairy producers to scale up production and reinvest in their operations. However, in June 2025, the situation changed drastically: the EU reinstated tariffs and imposed strict quotas on key Ukrainian exports—specifically butter and milk powder. This decision led to a sharp drop in exports and posed serious risks to the economic stability of processing enterprises and farmers.
Prior to 2014, the Russian Federation had been the primary market for Ukrainian dairy exports. After exiting the Russian market, significant volumes were redirected to Central Asian and Caucasus nations.
Until 2022, Ukraine had little presence in the EU dairy market—$2.7 million in exports in 2020, and $7.2 million in 2021. That changed with the EU’s introduction of Autonomous Trade Preferences (ATP) on June 6, 2022—commonly known as the “trade visa-free regime.”
In 2022, exports of cheese, butter, whey, skimmed milk powder, and condensed milk to the EU skyrocketed 14-fold, reaching $101.5 million. Thanks to ATP, Ukrainian enterprises could export without tariffs or quotas.
During the first five months of 2025, EU-bound dairy products accounted for more than half of Ukraine’s total dairy exports. Notably, sales to the EU nearly tripled compared to the same period in 2024 and were 5.5 times higher than in 2023.
Butter, milk powder, and condensed milk made up 89% of Ukraine’s dairy exports to the EU by value. Between January and June 2025, Ukraine shipped about 10,000 tonnes of skimmed milk powder and 4,200 tonnes of butter to the EU. For comparison, Ukraine produced 30,000 tonnes of butter in the same five-month period.
The EU thus became Ukraine’s primary export destination, accounting for 68% of exported skimmed and condensed milk, 56% of butter, 37% of whey, and 18% of cheese—establishing the bloc as a critically important partner.
On June 5, the ATP regime ended. The EU reintroduced tariffs and imposed annual quotas on Ukrainian dairy products: 5,000 tonnes of milk powder and 3,000 tonnes of butter. For the remaining seven months of 2025, quotas were limited to 2,900 tonnes of milk powder and 1,750 tonnes of butter. These are expected to be exhausted within 1.5 to 2 months—by mid-August. Beyond the quotas, tariffs will apply: over 50% of the price for milk powder and more than 30% for butter.
In April, Ukraine exported skimmed milk powder to the EU at an average price of €220 per 100 kg. While tariffs were not yet in effect that month, exceeding the quota would raise export costs to €338.8. For butter, the price would increase from €620 to nearly €810 per 100 kg. By comparison, the EU market price in April was €248 for milk powder and €739 for butter. This would make Ukrainian exports economically unviable for processors.
Following the reintroduction of quotas, exports of both products in June fell by half compared to May, according to the Union of Dairy Enterprises of Ukraine (UDEU). By mid-June, the Yahotyn dairy plant was already sending 50% of its production to storage due to export uncertainty.
“Right now, processors are rushing to exhaust the quota while it lasts. According to our estimates, 20–25% of the quota has already been used. If this pace continues, July will be the last month of shipments—then it’s over,” said Leonid Tulush, head of UDEU’s analytical department.
At the same time, the domestic market cannot absorb the surplus. Butter and milk powder are not consumed in such volumes in Ukraine—one-third and two-thirds of production, respectively, are exported. Even lowering prices won’t generate enough demand to cover production volumes.
This forces producers to shift to “warehouse mode,” creating risks for farmers, who may lose profitability as demand for raw milk declines. In 2025 alone, milk prices have already fallen by 18–20%, and any further drop could jeopardize the operations of agricultural holdings and farms.
The entire supply chain is affected: farmers lose buyers, processors lose markets, and investments stall. An industry that had been rapidly growing now risks stagnation. This is particularly critical for large producers who launched major expansion projects. They could lose access to working capital, face slower credit issuance, and see market contractions.
Alternative markets such as Africa, Southeast Asia, and the Middle East do exist. However, they are not capable of replacing the EU market in the short term.
“Redirecting exports is practically impossible. First, the volumes are too large. Second, African countries usually buy through major international tenders. We can’t ship through seaports either—insurance doesn’t cover ‘Greater Odesa’,” explained Dmytro Strikhovskyi, Deputy Executive Director of UDEU.
According to Reuters, the EU is planning to increase quotas for butter and skimmed milk powder to the highest levels in recent years.
Industry representatives hope that the allowed export volumes will be expanded two to three times. Deputy Minister of Economy Taras Kachka stated that Ukraine has secured agreements to increase agricultural quotas—specifically for milk powder and butter—by 308% and 233%, respectively, or up to 20,000 tonnes annually for milk powder and nearly 10,000 tonnes for butter.
The updated trade agreement between the EU and Ukraine covers 40 product categories and requires approval by a qualified majority of EU member states. It affects not only dairy but all sensitive Ukrainian exports.
This means voting may take longer, especially due to the need for alignment on all items with member countries. Even if significant quota increases are approved, they will still limit industry growth. Processing companies will be forced to plan production based on capped export volumes, which will hinder the sector’s expansion.
If the decision is made by mid-August, it could ease the current pressure on the market. If not, exports of key dairy products will be halted until either quotas are revised or until early 2026.
Producers will have no choice but to store their output, lose access to markets, and freeze development projects. This may trigger layoffs, loss of skilled labor, production declines, and disruptions in well-established supply chains.
A drop in production volumes will also lead to reduced tax revenues and lost foreign currency earnings, further pressuring Ukraine’s national currency.
Earlier we wrote that Ukraine begins talks with China to restructure $1.5 billion loan.