Ukrainian farmers have found themselves in a difficult situation due to the blockade of the ports of Greater Odesa and subsequent Russian attacks on the overland corridor. Dairy industry representatives, in particular, are reporting major problems. Ukrainian dairy producers are not major agricultural exporters, but amid global overproduction, they have already been forced to operate at a loss for six months.

Meanwhile, the enemy is also striking retail chains’ warehouse facilities. According to Olena Zhupinas, Deputy Director General of the Association of Milk Producers, this will inevitably affect dairy prices on store shelves. UNIAN spoke with her about the state of Ukraine’s dairy industry and expectations for prices.

— You have repeatedly reported that the cost of producing milk on dairy farms is higher than the price processors pay for it. What is the situation as of mid-August?

— Purchase prices for milk have risen slightly, but unfortunately, this does not cover the current cost of milk production. Silage production—the main type of roughage for cows—is now underway. Unfortunately, because of the heat this year, the silage quality is much worse than last year. And diesel fuel, costing UAH 95 per litre, is driving costs even higher. So, unfortunately, the situation is not improving.

— So, are farms still operating at a loss?

— Yes. Many farm managers say that, compared with last year, they are earning significantly less.

— If I understand correctly, milk yields have also declined?

— Milk yields have declined somewhat, yes. The heat has also affected them. But the main issue is that input costs are rising—and they are rising faster than milk prices. And now we also have to take the retail situation into account. Retail distribution centres have been destroyed, and retailers are only now working out how to deliver dairy products.

Retail chains are already warning processing plants that they will not pay for previously supplied products that were damaged because they do not have the funds to do so. They also want to shift their future risks onto processing companies. And the processors, in turn, will shift them onto farmers, who are at the beginning of the entire chain.

— As of mid-August, how much does a dairy farm lose on the production of one kilogram of raw milk—one hryvnia, two?

— I think that, as of today, it is definitely around UAH 2.

— But farmers currently cannot export grain properly, and grain prices are falling on the domestic market. Could this somehow help dairy farms by making feed cheaper?

— Not at all. Cows don’t eat that grain. Pigs and chickens eat wheat grain. Unfortunately, oilseed meals are not getting cheaper either. The only exception is corn. In addition to silage, corn grain is used to make corn mash for feeding cows. But the corn grain harvest has not yet begun. And given how expensive diesel fuel is, it is unclear what will happen to corn. I think a lot of corn may be left in the fields.

Farms will not harvest it, given that storage facilities are at risk—it could just as easily be a target of a strike. They will harvest it only under contracts that allow them to ship it out immediately.

— So, can we say that the situation for dairy farms is unlikely to improve in the near future?

— Not for now, unfortunately. Having operated at a loss during the first half of 2026, farmers were counting heavily on covering those losses through crop production—that is, through grain, oilseed and legume crops. But now, given the lack of exports, prices for those commodities have fallen, and they have also become unprofitable.

So Ukrainian farmers really are in a very difficult situation. It can be compared to the mid-1990s, when Ukraine had just gained independence and sales and supply chains were disrupted. We remember the decline of the agricultural sector, when fields were neither sown nor cultivated. Unfortunately, we could face the same situation in 2027.

— So dairy farms are not purely dairy operations; they have an integrated production model that also includes crop production?

— Yes, of course.

At present, the cost of milk production is rising worldwide. It is increasing in Europe and in the United States. This increase is related to both climate conditions and rising fuel and lubricant costs. Fertilisers are also becoming more expensive. We have the problem in the Strait of Hormuz, while the Gulf countries account for 30% of global fertiliser supplies. All of this combined is driving up the cost of producing raw milk. Unfortunately, as a country with relatively low incomes, we cannot fully pass these costs on to consumers.

It is clear that Ukraine is at war and that the state is primarily directing all available funds toward defence. But to save the dairy industry, we need to look to the European Union. It is a model for us in many areas related to livestock farming—for example, animal welfare and reducing emissions from livestock. But the VAT rate is also a factor. In Poland, the value-added tax rate is only 6%, whereas ours is 20%.

If our VAT rate were at the same level as Poland’s, dairy products would be more affordable, and processing plants would also be able to pay farmers more for their milk.

— As I understand it, demand for dairy products in Ukraine is gradually deteriorating because of the population’s low purchasing power?

— First, there is people’s purchasing power. Second, people are leaving the country. Third, our supply chains from processing plants to end consumers through large retailers have been completely disrupted after strikes hit the distribution centres of Silpo, Novus, and ATB.

How did deliveries to stores work before? The factory would deliver products to a large distribution centre, and the retailer would then distribute them by truck to individual stores. Now this chain has been disrupted—the warehouse is gone. Why do we see empty shelves? It doesn’t mean that these products are unavailable in Ukraine. It simply means that the factory cannot get them onto store shelves because the retailer’s warehouse has been destroyed.

— Is there an alternative to the major retail chains? For example, could products be distributed through small neighbourhood stores?

— The refrigerators in small stores are not designed to hold such quantities of dairy products. They might fit three or four more bottles, but what happens after that? They are not equipped to sell large volumes of goods. And dairy products, especially in summer, require strict temperature control.

— Could the situation change in the autumn?

— The retail chains are currently looking for alternative warehouses. I know that the Ministry of Agrarian Policy is also working on this because, of course, store shelves in Ukraine should not be empty. And they should not contain only dairy products—right now we are experiencing disruptions across the board, so dairy products are no exception.

Perhaps the factories themselves will look for alternative routes. For some time, we may not see products from Lviv, such as Halychyna, or from Ternopil, such as Molokiya, on the Kyiv market. But we may see products from the Milk Alliance or Vyshneve Dairy Plant. They are located near Kyiv and may be able to deliver their products to retailers.

— You say that production costs for processors are also rising, while retailers are suffering losses because of the destruction of their warehouses. Is there reason to expect dairy products to become more expensive?

— Prices will definitely rise. We have to understand that all these business losses will, in one way or another, ultimately fall on the shoulders of ordinary Ukrainian consumers.

And here we have another problem: dairy prices will rise, but the farmer who produces the milk will not receive a higher price for the raw material. The difference represented by the price increase will primarily be used to cover losses incurred by retailers. And once again, the farmer will be left out of that money.

— Can you estimate by how much dairy products could become more expensive? Will it be, say, 5–10%, or more?

— I think it will be more than 5%, and more than 10%. We expected a 5–10% increase as part of inflation—we have annual inflation of almost 9%. I think the increase will be higher because all these losses will have to be covered somehow. Perhaps the government will negotiate long-term loans for retailers with our European partners or find other solutions. We have to understand that if prices rise by 25–30%, consumers will buy and consume less of these products.

unian.ua