Ukraine is now less dependent on foreign markets – Ukrainian dairy producers actually have nothing to sell. But at the same time, the influence of imports is increasing. The prices for dairy products in Ukraine remain quite high and this attracts foreign suppliers.
We are summing up the results of dairy exports in the first half of the year. The results are, to put it mildly, quite shoking. Dairy exports have significantly decreased, while imports of almost all types of dairy products increased several times even compared to last year (previously they were less). In monetary terms, the positive balance has become quite insignificant – plus 23 million dollars. We have sold dairy products worth $154 million, and even taking into account exports of milk-containing products (minus 20% compared to last year), and imported dairy goods worth $131 million, 2.7 times more than in the first half of 2019. In milk equivalent, the plus is also small – sold are 330 thousand tons and bought 220 thousand tons of milk. For the country that recently had a net export of a million tons of milk, these are very bad indicators. If the trend has not urgently changed, then next year Ukraine will become a net importer of dairy products in milk equivalent, not to mention money with all the ensuing consequences.
If a couple of years ago Ukraine imported only exclusive cheeses and some fresh dairy products, now the huge assortment is imported – a huge amount of cheeses and butter, a lot of fresh dairy products and even powdered milk and whey. For example, compared to the first half of 2019, imports of cheese increased by 2.6 times to 19 thousand tons, that is, every third kilogram of cheese sold in Ukraine is of European origin. The imports of butter have increased 40 times, to 6.4 thousand tons. Two years ago, Ukraine was considered one of the world’s largest exporters of butter. Imports of other dairy products have also been growing exponentially.
Until recently, European companies were actively promoting their goods on Ukrainian market, but in the near future Belarusian suppliers will show their interest in significant dairy exports increase to Ukraine. Russia, which is the main buyer of Belarusian dairy products, is rapidly and substantially increasing its own production of milk (+1 million tons this year) and dairy products. Very soon it will reduce imports of these goods from Belarus.
Belarus has also increased milk production and intends to further increase it. It will have to look for the markets alternative to Russia. Belarusians will look for these markets, first of all, in the post-Soviet countries. In this regard, Ukraine, as a large importer, will be in the first row of potential buyers. That is, in the near future Belarusian producers will try to develop exports to Ukraine not only of raw materials, but also of fresh dairy products and cheeses. It is possible that next year supply of Belarusian dairy products may become comparable to the volumes currently supplied to Ukraine by Poland (now more than half of European exports to Ukraine are from Poland).
Ukrainian dairy industry should not allow such a scenario to develop. Otherwise, there will be very few chances to revive the country’s dairy industry. This should be clear not only to producers of dairy products, but also by dairy farmers. Having our borders open, domestic milk should in no way cost more than that in our neighbor country. But, unfortunately, it looks like in a couple of weeks Ukrainian dairy farming enterprises will again sell their milk for the price higher than Polish and Belarusian milk. Naturally, this will contribute to a further increase in dairy imports.
Farmers should wait to raise milk prices, because the profitability of milk production after the spring season fall has already begun to grow. According to Infagro estimates, the average operating profitability of milk production in well-established farms in the first half of the year is 30%. According to FAO experts, the Milk Index (UMI) even increased in June and the profitability of milk production in the first half of the year was the highest since 2014. So, milk producers cannot complain and it would be worth thinking about the prospects of the whole dairy market in the country until it has not yet been completely occupied by dairy producers from neighboring countries.
At the annual conference DAIRY BUSINESS 2020, which will traditionally be held at the end of November, there will certainly be a big discussion on the dominance of imports on Ukrainian dairy market. We will present the real data, from which it is clear even now that domestic market needs protection and it is impossible to postpone solution of this urgent problem any longer. We invite professionals to take part in the conference, where we hope to find a good solution feasible in real circumstances.