Let’s start with the fact that in our country the talks on the plight of the rural population arise with certain periodicity. All our elections campaigns readily use the slogans on poor peasants. Today they are really poor and political slogans make the impression that politicians are trying to help farmers. But they are just slogans, nothing more. There has been no real help provided by politicians, especially when it concerns the problem of milk produced in rural households.

In fact, historically, formation of this group of milk suppliers was rather chaotic. It was not planned anything to arrange proper logistics, installation of refrigeration points. There was a lot of media noise, but it was done actually nothing. During the period when Tymoshenko was holding various populist actions, for example, there was a campaign conducted for establishing service cooperatives. Money was allocated for buying milk trucks, but in the end of it is appeared that Indian Tata were bought and stainless steel Karlivka tanks were installed on their platform. All this turmoil went a zilch.

In fact, the first thing is to do is to remove the intermediaries. Just here, in the sector ob private milk suppliers there are now a lot of intermediaries. They have established private entities and work with cash, the so called “black cash”. So, now collecting milk from farms is a criminal business. There are very many of such businesses. They have strengthened, bought coolers and they became the “owners” of the population which produce milk in households. Each of the intermediaries has its own zone of influence, its own raw milk collection zone.

I believe that the first thing to do is to remove these agents in the form in which they exist now. We cannot put any legal claims to those who are now engaged in this activity. If we do, there will be immediately talks that this is contrary to the Law on entrepreneurship. I am not against business. On the contrary, I have always supported it. But if an intermediary businessman is working in the dairy sector, he must fulfill all the rules accepted in this industry. The rules are mandatory for milk suppliers and processors, and all should keep them. But then the mediator, who is acting as a part of the production chain, must keep them too! Their tanks should be clean, the truck washed and these people should have the appropriate sanitary certificates and so on. These entrepreneurs, I believe, must pass certification to get the right to do business in dairy industry. If you pass the certification – certainly, you have the right to work. If not – sorry, this activity is not for you.

First of all, this is necessary to do for the sake of the rural population, so that they may get more money for their milk. Nowadays the mediator is fed by both sides:  processor and rural households supplying milk that he collects.

As to who should establish the proper business practice in the area of the intermediation, I believe it should be, first of all, the local administration. After all, they should be interested in the welfare of the rural population. At the same time, the local dairy processing plant should be considered as a partner and a major player. If processor is ready to accept and process the milk of weak quality produced in households, he also has to get engaged in this issue to improve the quality to make it fit dairy processing.

The cow does not give bad milk. It becomes of bad quality because of people. Therefore, it is necessary to take care of quality. And here it is appropriate to mention cooperatives. The service cooperatives, like those created by Milkiland some time ago, were not aimed at rural development. They were created rather for the purpose of tax optimization. We can also mention the mechanism of subsidies, which seemed to have been used for farmers support and actually worked to reduce the cost of production of dairy processor. That is, once some good decisions have been taken, but their use was one-sided.

My opinion is that it is necessary to create cooperatives, which would include processor and a group of private individuals, farmers. But we have a law on cooperatives which prohibits founding of cooperatives of this kind – between legal entities and individuals. According to our law, only individuals can be united into cooperative. One can certainly create an artificial scheme – that is, dairy processor can delegate his rights in the cooperative to an authorized person to represent the dairy. But if the fraud begins from the very beginning, the whole idea will be damaged further with more fraud elements.

That is, the changes to the law on co-operation are necessary. While some representatives of the agricultural sector say it’s impossible, I think that is possible. Who generally comes up with all these laws? People. That is, people then can change these laws. By law cooperatives should get the status of the agricultural producer, single tax payer, and then the VAT which he would be paid for his milk by the dairy processor (for individual he pays excluded) must remain at the disposal of the cooperative. And then there will be no need to invent some state funds and seek additional money to help the farmers, because these will be the additional 20% that will remain in the possession of the cooperative. They can be directed to breeding work, veterinary matters, purchase of feed, improving conditions for animals, purchase of milking machines, and so on. This is real. It can be done.

And then you can demand from the population supply of good quality milk. Then households can get more for the supplied milk. The delivery of milk produced in households is quite expensive. If agricultural  logistics costs account for 30-40 kopiyka/kg of milk, the cost of that for delivery of milk from the households ranges from 80 cents to UAH 1.20/kg.

Local administrations should actively be engaged in organization of cooperatives. Just they should be interested in local households milk supply to the local milk processors. It is necessary to carry out joint dairy processors -village inhabitants meetings to inform people about the benefits of cooperative collaboration. Creating a cooperative, firstly, will allow increase tax revenues to local budget. In addition, the production capacity of local processor will grow and this will also mean more tax revenues, more new jobs, development of cooperative and therefore rural areas themselves.

In this case the local dairy will have the raw milk supply zone with secure and reliable source of milk for processing. And this will be not because of an administrative decision, but based on business relations that between households and processors.

Why do I believe that dairy processing plant should be a member of the dairy cooperative? Because to be a milk supplier in dairy business, village has to be equipped with appropriate modern equipment, instruments and methods of analysis at a milk collection point. It is impossible to arrange all that in a village without involvement of a dairy processing plant. The dairy can provide financial support and technical consulting, advice, training for milk collectors, etc. And then this will be a viable model that will work. I have provided the economic model calculations “Production cooperative = Dairy processing plant + Farmers”, but there has not yet been progress in this direction, perhaps because there were no changes to the legislation done yet.