VASYL VINTONYAK, Director Infagro: Ukrainian dairy industry is confidently holding its “front” bringing the Victory closer

In Febrary russia’s brutal attack on Ukraine changed everything in our lives, and the plans of Ukrainian dairy farmers and processors were also destroyed.  The enemy occupied the territories where dairy farmers had peacefully worked and dairy plants were successfully functioning.  Thanks to the heroism of the Ukrainian Armed Forces, part of the territory of Ukraine was freed from the invaders, but they caused a lot of damage there – destroyed the dairy farms, damaged dairy factories.  Missile attacks are still carried out even in the territories far from the front, causing damage, including damage to milkmen.

However, Ukrainian farmers and milk processors do not give up, confidently holding their “front”, bringing the Victory closer.  Milk producers are active even in the front-line areas.  Dairies process all the milk offered, even if it is economically unprofitable, ensuring the country’s food security.

Because of the war, according to preliminary estimates, in the current year there will be 15% fewer cows in Ukraine (1.4 million heads), and milk production will decrease by 14% (to 7.6 million tons).

In 2022 milk processing will decrease by 15% to 3 million tons.  The most significant drop in production is expected in the category of fresh dairy products and cheeses, the consumption of which will decrease significantly (fresh dairy products by 17%, cheeses by 23%).  Such pessimistic assessments are based on the factor of the demographic crisis (loss of territories, migration) and the decrease in the solvency of Ukrainians due to the economic crisis caused by the war.

Schedules in foreign trade in dairy products will change dramatically.  Despite the high prices on the world market, dairy exports in the equivalent of raw milk will decrease by 14% to 0.55 million tons. At the same time, Ukrainian exporters are forced to sell their products at prices significantly lower than the world prices due to the blocking of Black Sea ports and lost opportunities for transit through the hostile russian or belarus. We had to build new logistics routes for supply of products to the world markets through the EU countries.  This process turned out to be quite difficult and too expensive.  However, there are also positive changes.  For example, the friendly countries of the EU exempted Ukrainian goods from all quotas and duties for a year, which allowed a number of domestic companies to significantly increase the export of dairy products to Europe.

According to preliminary estimates, in current year import of dairy products in may be even halved to 0.3 million tons of milk equivalent compared to the pre-war year 2021.  Many supplier companies are afraid to work in the country in war.  But the main reason for such forecasts is milk price, which in Ukraine is significantly lower than in EU countries, the main suppliers of dairy products.

Big problems arose during the war and in the domestic dairy trade.  Supply chains were disrupted, logistics warehouses were destroyed, shops were destroyed, and there was a problem of staff shortages.  Due to these and other negative factors, retail chains often make too high markups on dairy products, and the pre-war problem of payment settlements with suppliers has not been resolved.

In addition to the disaster caused by the war, old problems remain unresolved in our dairy industry: low level of consolidation, problems with management, marketing, sales, weak government support…

But we believe in the entrepreneurial abilities of Ukrainian manufacturers, processors, and traders.  Running dairy business in Ukraine has never been easy, but hard-working, responsible, smart and resourceful industry specialists have always found a way out of difficult situations.  If the state joins the efforts of dairy farmers to preserve the industry with its proper support, the situation will get impoved quite quickly.

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