Analyzing the current state of our raw milk market, we can see that over the past 5 years it has been quite stable. There is milk provided by farms and by rural households. The milk produced in households unfortunately keeps bigger share. I say “unfortunately”, because this milk is not safe, and its supply chain is not traceable. The share of this milk on the markey is around 73%. 27% is the share of milk produced in dairy farms. This is traceable, safe milk which is suitable for manufacturing of quality dairy products.

What makes me pleased and rises optimism is that our farmers have already become businessmen. They are working in the market environment where the strongest survive. There is a growing number of people who are professionally engaged in dairy business: they care about business development, pay attention to cows’ productivity and milk quality, analyze the cost of production. Every year it’s easier and easier to work with them.

With milk purchased from households things are much more complicated. Many dairy processors say that this milk is cheaper and therefore it is more profitable to work with it. But if we analyze total expenditures, including the cost of delivery to processing facilities, quality assurance measures, managing procurement, etc., then I would not say that this milk is actually cheaper. On average, its cost is comparable to that provided by dairy farms, but in case of milk from households we cannot manage its quality and production volumes (seasonality). In winter there is no this milk, so, nothing to process. In summer, there is an abundance of this milk, so it has to be processed into, say, dairy ingredients, which are then used in production of dairy products. Accordingly, this means “frozen money”, which does not contribute to high competitiveness. It also leads to the rise in price of the final product.

Now we can observe the prerequisites for the development of family farms, which are organized or not organized in cooperatives, generally, it does not matter. Important is that rural population has already understood that milk should be produced not the way it has always been before, but professionally.

In the “business” of milk production in households, neither producers, nor dairy processors are earning. The money is earned by traders, milk collectors.

When we consider family farms, a new category of milk producers on Ukrainian market, it means production of milk of a completely different quality. I think it can be compared with quality of milk supplied by dairy farms. The ways of co-operation with family dairy farms are quite different from that of private households. Another price policy is applicable in this case. Family farms can be motivated to increase supplies and improve quality. We have to develop co-operation and monitor this segment of milk producers.

Now there are many state programs aimed at dairy farming support. I hope that some money allocated on dairy farming support, will still reach people. This would motivate our rural residents to produce milk.

The herd size at Ukrainian dairy farms spans from 50 cows to 4 thousand cows, that is an average size is about 400-500. This is a farm where standard milking equipment is installed, proper manure removal is organized. Milk is cooled. There are professionals on these farms who are capable to manage feeding, reproduction, animal health and so on. All this helps to achieve stable quality of milk and stable volumes of milk supply. We call this milk “farmers’ milk”.

Small family farms are a new category of milk producers. In my opinion, their share in production is still very small. In total volume of milk produced by rural households, I think, it constitutes not more than 1%. But the milk produced in family farms I cannot relate to milk produced in households. Small family farms usually keep from 5 to 50 cows. Families who start this business, strive to facilitate their work introducing mechanization, they try to ensure the proper quality of milk, monitor the cost of production. And I consider the milk from such farms as “farmers’ milk”.

As for the milk produced in households and purchased into jars-bottles-cans, collected by milk trucks and sold on the markets – such milk, of course, is unsafe. I think thst there is still not enough control of such milk safety. This concerns both control of animal health and quality of milk itself. Therefore, I think that it is necessary to direct efforts to increasing the share of milk produced by agricultural enterprises (dairy farms).

Every next year we get more and more milk taken into processing from farms, and this is a very good trend. Now, in the total volume of raw milk taken by dairies, the share of farmers’ milk is already more than 55%. And this means that our dairy products are becoming safer and more quality.

Recently, the introduction of the new milk regulations that exclude acceptance into processing of the 2nd grade milk was postponed. In my opinion, such decisions demotivate both processors and milk suppliers. Actually, this kind of decisions appear when an election campaign comes soon. I think this is nothing but populism. I do not know how many times such delays are going to be introduced, but the more times the delays happen, the slower we will reach high standards of food safety.

As for the milk grades in general, I have akready expressed my opinion at the Dairy Business conference: milk can be either safe or not safe. Consumer, regardless of age, needs safe product. The milk safety criteria set back in Soviet times, were regulated by grading of milk. The milk grades are actually used as a tool for price management. Or management of voters before elections.

Safe milk should not contain any additives, antibiotics or inhibitors, it must be obtained from an absolutely healthy cow, which is kept in a comfortable environment that meets certain sanitary and hygienic standards. Milk from such cow will always be safe: that is, with less than 200,000 somatic cells, a microbiology of less than 100,000/ cm³. In general, milk from a healthy cow, provided that it is cooled in 2 hours down to 4°C, can contain 10 to 30 thousand bacteria, not more. We have such milk in Ukraine. It’s really safe.

Now about the last initiative manifested by the deputies of Verkhovna Rada regarding introduction of 0% VAT for agricultural producers of milk. In my opinion, this step will not help reduce the price of dairy products, as it is stated in the Explanatory Note to the “Draft Law on Amendments to the Tax Code of Ukraine on the reduction of the VAT rate on supply of milk in the customs territory of Ukraine”.

Moreover, such novelty will increase the cost of milk production. The fact is that milk producers obtained a partial refund of VAT and they could offset part of the costs. And if it becomes not refunded, the cost of milk will increase. Therefore, when planning their budgets dairy farmers will be looking for the ways to shift these extra costs to dairy processors. So, we, processors and producers, either settle this matter, or will have to increase the price of the finished product. Therefore, in my opinion, the innovation with VAT does not look as a logical step.

As far as I know, Association of milk producers, AVM, is now very active promoting the right things that farmers need. They insist that the VAT refund for milk producers should remain, so that they could reduce the cost of milk production and invest in development of dairy farming. The 0% VAT for milk producers, which is now proposed by the deputies, will lead to the increase of milk purchase price, and, accordingly, to increase of the price of finished dairy products. Hopefully, the mentioned amendment on the 0% VAT for milk trade operations in the form it has been declared, will not be adopted.