CPC inquiry reveals profitability gap in Cyprus halloumi production

A sector inquiry by the Commission for the Protection of Competition (CPC) in Cyprus, covering the period from July 2022 to July 2023, has highlighted a significant profitability gap in the dairy industry. The report reveals that while sheep and goat farmers face marginal profits or losses—with production costs for goat milk reaching 1.18 euros per liter and sheep milk 1.78 euros per liter—large cheesemakers maintain net profit margins of 4 to 14 percent.

Market analysis shows the cheesemaking sector operates as an oligopoly, with five major companies controlling 74.6 percent of the market. Approximately 2,066 livestock units produced 84.3 million liters of sheep and goat milk in 2023. However, the industry is fragmented, with only 20 percent of this milk sold through organized producer groups, leaving the remaining 80 percent vulnerable to pricing pressure from large manufacturers. The study confirms that halloumi, protected by its PDO status, is the primary factor influencing milk pricing.

The findings indicate that small-scale sheep and goat farmers are heavily dependent on state and EU subsidies to remain operational. The CPC inquiry underscores the systemic imbalance between the fragmented farming sector and the concentrated processing industry, which continues to drive competitive distortions in the local market.