VASYL VINTONYAK, Director Infagro: On the INFAGRO analytical agency, Dairy Business conference and the current state of Ukrainian dairy industry

vasyl_vintonyak180_smg_0743-2600pxDN: Vasyl, you are the owner of the INFAGRO analytical agency, right?
VV.: Yes, I am.
DN: How did the idea of establishing INFAGRO appear?

VV.: The idea was spontaneous. Another thing is why we have chosen to specialize in dairy business. At first I thought about being engaged in analysis of all the branches of agri sector, as it was on my previous jobs. But then I realized that it was better to concentrate on something specific and research it deeply in details. Scattering on all business areas is not very effective. So, I decided to consider the topic that other analytical agencies were ignoring because of certain difficulties in gathering information. Thus, the idea of dairy market research appeared and now we are engaged mainly in the dairy business analytics.
DN: How much time has your agency been operating?
VV.: For ten years. During this time, we accumulated considerable experience, formed a professional team and created a lot of information products. We provide different services from brief consultancy advice to the global marketing research. And what is most important – we conquered the trust of our customers, who have been co-operating with INFAGRO for years.
We also organize seminars and conferences. By the way, our IX Annual National Conference DAIRY BUSINESS – 2016, which has already become traditional, this year will be held on November 24. As always, it there will be many representatives of the dairy industry of Ukraine and their foreign colleague. For many years we have organized this conference in cooperation with the Dairy Union of Ukraine.
Dairy people need quality information to run their business and they need communication with colleagues and partners. They were interested in a proper platform for this communication. This conference was originally founded on the principle: “If you want to communicate – let’s talk. We can organize, invite experts and officials. You will hear others and have the possibility to express your point of view.” Then the event became traditional. All participants of the dairy market in Ukraine know that at the end of each autumn there will be the conference, where you can meet and have discussions. During the year most of the colleagues speak on the phone or write mails, and now they have a chance to meet and communicate in person.
I think it’s a pretty useful event and it has grown into the event of international level. We used to call the conference “Ukrainian with international participation”, but actually every year we welcome delegates from more than ten countries ranging  from neighboring Belarus and to distant New Zealand.
DN: How many participants attended last year?
VV.: More than two hundred.
DN: How many do you expect this year?
VV: We expect about 250 participants. It could be more, but the market is quite narrow. Our delegates represent 70-80% of all the dairy industry and dairy trade. In addition, there are a lot of foreign experts, traders and representatives of related industries who come to participate. Also, we always invite some of the key people in the government, so that participants could put “uncomfortable” questions, such as “when can we expect that you start to help our industry?”.
DN: Are there any foreign experts who have already confirmed their participation in the conference as speakers?
VV.: Yes, of course. Adriaan Krijger has already confirmed  his speaking on the global dairy matters. He is the world recognized Dutch dairy expert, and he visited our conference in 2013. Mr. Liu Jun, Counselor of Economy and Trade of China Embassy in Ukraine will speak on the prospects of dairy trade between Ukraine and China. Among the delegates there will also be Andriy Yarmak, FAO (TCIN) expert. We are expecting Alexey Bogdanov, Head of the Department of Foreign Trade, Ministry of Agriculture of the Republic of Belarus. Mikhail Mishchenko, Director of Dairy Market Research will present his view on the impact of Russia on the world dairy market. Maybe a big Dutch dairy company will take part, we are expecting for confirmation. By the way, I would like to take this opportunity to express our gratitude to the Economic Cluster of the Royal Netherlands Embassy in Ukraine who actively helps us in organizing the event.
DN: You also mentioned that there will be some officials taking part.
VV.: We have a new official structure – The State Food Safety and Consumer Protection Service, led by Vladimir Lapa. This is the body which have already changed many of the existing regulatory veterinary practices in agriculture. Volodymyr Lapa will speak at the event. The Deputy Minister of Agriculture and Food Olga Trofimtseva was also invited. In the Ministry she is responsible for the European integration. Legislators that attend the conference usually represent agricultural committees. Leonid Kozachenko, Verkhovna Rada deputy, participates in the event every year. I cannot number all here, there are many very interesting personalities, industry professionals who never miss the event.
DN: Vasyl, now how would you describe the investment climate in the dairy sector of Ukraine?
VV.: You see… The country is suffering from multiple deep and protracted crises. Primarily I mean the geopolitical crisis related to the events in Crimea and Donbas. It caused the acute economic crisis: three-time devaluation of the currency, hryvnia, the instability of the financial system. Now there is no clear understanding of what will happen tomorrow. In this situation, investors are very cautious looking at Ukraine as an object of investing money. When the situation gets more or less stabilized, everything will be fine, as it was before, in the recent 2013. I think investors will definitely come here. First of all, they are interested in 40 million of Ukrainian consumers. The companies that came here just wanted to get a big market. For a long time French companies Lactalis, Danone, cheese makers Savencia, Bel have been operating on the market. But they can rather be considered as the old investors, those who came here “yesterday”.
DN: How many dairy farms and processing plants are there in Ukraine?
VV.: There are 2.5 thousand of dairy farms, taking into account farmers. Of them farmers constitute about 800, the rest are agricultural enterprises, which can be considered more or less significant milk producers. Of this category we can allocate 500 enterprises that produce 70% of milk (in the category of agricultural enterprises).
DN: Are these 500 big?
VV.: Yes, they are large farm holdings that run dairy farms in different regions and can offer large amounts of milk. Such agricultural holdings are Astarta, Landfarm, Svarog and other …
DN: How many processing plants are in Ukraine?
VV.: There are about 200, but only 100 can be considered effective. Of this hundred we can single out 30, which process 70% of raw milk. So, we can say that the market is consolidated, the number of enterprises is being reducingd, and this is normal.
If to compare with the situation of 10 years ago the number of agricultural enterprises decreased by more than a half. If to look at dairy processing, the number of processors has also decreased significantly and it will continue to decline (once in the country there have been 450 dairies). By and large, 50 companies could easily handle the proposed volume of raw milk. The dairies that are upgraded and benefit from permanent investment will survive. Many regional small businesses will stay out of operation. However, if they get reoriented to a specific product type like, say, goat cheese, they will stay on the market. But if they continue producing traditional dairy products, they will gradually will be removed from the market by powerful competitors.
DN: How much milk was produced in 2015?
VV.: Statistics shows that in 2015 we produced 10.5 million. tonnes of milk. But in reality, it is unlikely that this is true. There are experts who believe that Ukraine has made only 8 mln. tonnes. But I still think that the country’s annual production is more than 9 mln. tons, even with the fact that we have lost Crimea and part of Donbas (the data on these territories are not taken into account by statistics).
DN: How much milk is supplied for processing
VV.: Last year dairies got for processing 4.2 mln t, less than a half of the total production. There is a big volume of consumption of dairy products produced in households. The rural population (18%) consumes a lot of dairy products produced themselves, so it is impossible to neglect this part of the market. Many of the dairy produced in rural households is still sold in urban markets. According to statistics, 7.5 mln t of milk is produced just in households and the agricultural enterprises produce only 2.6 mln t. The difference is significant. Statistics shows that more milk to processing comes from farms, not from the population.  Previously, it was different, the proportion of dairy farms in production was much smaller, and this means that the situation is improving. Agricultural enterprises do not reduce production. The number of livestock falls by 2-3% annually, but the increase in productivity remains stable.
At the same time the prospects of the household dairy sector seem dim. Milk production in this category of producers will continue to fall. Dairy farms should understand this and make efforts to replace this shortage. So far we have a surplus of raw milk, but it is mainly seasonal. In summer we have a lot of milk, and sometimes we are exporting. If we have 4.2 mln t processed, then 800 thousand tons, about 20% of this amount, has be sold for export in the form of cheese, butter, milk, otherwise the balance does not converge. The domestic market is not yet ready to consume the amount that dairy industry offers.
DN: In general, is there enough milk in the country? Or there is a shortage?
VV.: We have a seasonal production. In summer we have surplus, but in winter there is often lack of milk. So we observe some price fluctuations, and then we import dairy. Before the crisis, when our market was stable, Ukraine imported substantial volumes of butter. Now we are exporting this product because the hryvnia is cheap and foreign currency is preferable.
DN: What countries are you importing from?
VV.: New Zealand, the USA. Even from there imports of butter was profitable. But we stopped imports from neighboring Belarus, which is among the world’s largest exporters, because of the high price. The prices in Russia were higher than on the world market prices. Belarusian butter is sold $ 1,000 more expensive than European product. But when the hryvnia depreciated in 2014, imports stopped, and we are already exporting our butter.
DN: Which countries, apart from Asia, in your opinion, Ukraine would be interested to export to their products?
VV.: In commercial sense, the most interesting market was in the market of the Russian Federation. No one pays as much as Russia. Then go post-Soviet countries, primarily Kazakhstan, Georgia, Moldova, Azerbaijan and Armenia. There we can sell at prices above the world ones. In Europe, which has opened its market to Ukraine, our dairy cannot be present in reasonable amounts, because there is a surplus of their own milk there. So far the EU market for us is not promising. Africa and Asia markets are very big and interesting, but all the countries are focusing on them now: Europe, America, Oceania, all of them are selling there. It is a lot of competition, but Ukraine is actively involved.

The complete version of the interview is on The DairyNews (in Russian)

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