A milk market investigation has exposed significant differences in profitability between livestock farmers and major dairy processors, with goat and sheep milk production often operating at a loss while some large cheese manufacturers record profit margins of up to 14%.
The Commission for the Protection of Competition (CPC) examined the production and marketing of goat, sheep and cow’s milk during the period from the implementation of the July 22, 2022 agreement between livestock farmers and cheese producers until July 25, 2023. The investigation was completed on September 25, 2026.
Its findings highlight the fragmented position of goat and sheep farmers, the concentrated structure of the cheese-processing sector and Cyprus’ heavy reliance on imported animal feed.
Goat and sheep farmers have limited bargaining power
Around 2,066 goat and sheep farming units operate in Cyprus, producing approximately 84.3 million litres of milk in 2023.
However, only 20% of goat and sheep milk is marketed through organised producer groups. The remaining 80% is sold directly by individual farmers to cheese manufacturers, limiting their ability to negotiate better prices.
The situation differs in the cow’s milk sector. Some 275 dairy farms produce approximately 300 million litres of milk, while the Pancyprian Organisation of Cattle Farmers (POA) plays a leading role in marketing and price negotiations.
The investigation identifies the cheese-processing sector as considerably more concentrated. Of 108 registered cheese factories, five major businesses account for 74.6% of the market, according to the report’s conclusions. Seven large companies are also identified as controlling more than 80% of halloumi exports.
The companies named are Charalambides Christis, Petrou Bros, Papouis Dairies, Dodoni, A/foi Pantziarou, Lefkonitziatis and Achnagal.
Production costs leave farmers facing losses
The CPC’s cost analysis of model farms with 500 animals found that goat and sheep milk production can be unprofitable.
The average production cost for goat’s milk was estimated at €1.18 per litre, resulting in a loss of €0.33 per litre. For sheep’s milk, the estimated cost reached €1.78 per litre, with a loss of €0.38 per litre.
According to the findings, state and European subsidies play a significant role in keeping many livestock farms operating.
Large cheese manufacturers, meanwhile, recorded net profit margins ranging from 4% to 14% between 2021 and 2023. Smaller businesses experienced weaker results, with margins ranging from 1% to losses of up to 8%. Some companies were temporarily affected by the energy crisis in 2022.
The findings underline the gap between the financial pressures facing primary producers and the returns generated by parts of the processing sector.
Imported animal feed adds to pressure on prices
The report also highlights Cyprus’ dependence on imported animal feed, which accounts for up to 90% of requirements.
The island’s location, high shipping costs and exposure to international price fluctuations contribute to production costs. Cyprus also consistently records the EU’s highest average prices for fresh cow’s milk, at €0.1358 per kilogram above the European average, according to the investigation.
The CPC points to tensions over raw milk prices. The Agriculture Ministry has noted that cheese manufacturers seek lower input costs to remain competitive in international markets.
However, the report suggests that goat and sheep farmers, whose production is more fragmented, have less bargaining power than their counterparts in the cow’s milk sector.
It records the perception that lower prices for goat and sheep milk help offset the higher prices paid for cow’s milk.
2022 agreement on milk prices largely implemented
The investigation also assessed compliance with the framework agreement signed on July 22, 2022, between livestock farmers and cheese manufacturers.
The agreement established minimum safeguard prices of €0.80–€0.90 per litre for goat’s milk and €1.35–€1.45 for sheep’s milk, alongside an increase of at least €0.05 per litre for cow’s milk.
The CPC found that these minimum prices were respected and, in several cases, exceeded. The agreement’s requirement for cheese factories to absorb the entire milk supply was also fully implemented, helping prevent surplus milk from going to waste.
Although collective agreements involving prices can raise competition concerns, the commission noted that the framework fell within the relevant EU Common Market Organisation rules under Regulation 1308/2013.
The agreement was intended to stabilise the market and support producers during a period of severe pressure. The investigation found no evidence in the available data that its implementation had distorted competition.
Nevertheless, the CPC stressed that businesses must maintain transparency and independence in their commercial decisions. Producer groups and cheese manufacturers must determine prices and trading terms autonomously and avoid anti-competitive agreements, price-fixing or customer allocation.
CPC proposes structural reforms
The commission argues that continued state support can offer only temporary relief unless deeper changes are made to the sector.
Its recommendations include encouraging smaller livestock farms to expand or merge, reducing fixed costs per litre and enabling farmers to secure better prices for animal feed through bulk purchasing.
It also proposes developing domestic production of ultra-high-temperature (UHT) milk, which is currently entirely imported. Local production could help absorb seasonal surpluses of fresh milk.
Targeted state support for domestic animal-feed production is another recommendation, aimed at reducing the sector’s exposure to international market fluctuations.
The CPC concludes that modernisation, transparency and greater business autonomy are necessary to improve the long-term viability and competitiveness of Cyprus’ dairy sector.
Also read: Halloumi exports exceed €350 million a year
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