Over the past 30 years, Ukrainian milk producers have been receiving one defeat after another. Since the collapse of the USSR in Ukraine, milk production, the number of milk processing enterprises and the number of cows have greatly decreased. A war with Russia will only exacerbate these trends. But there is also some positive news. Because of the hard life, the peasants will love to raise cows again. This deindustrialisation of milk production could prove to be a miraculous renaissance of the industry.
The situation in the industry
In 1991, Ukraine was in 6th place in the world for milk production.1 In 2021, the country ranked 18th according to official information. However, according to unofficial data, it was 32nd place.2 Be that as it may, the degradation of the dairy industry is obvious. The data are presented in the table.3
| Data | 1990 year | 2020 year |
| Milk production, million tons | 24,5 | 9,8 (6,5)* |
| Milk processing, million tons | 18 | 3,8** |
| Number of milk processing enterprises | 643 | 192*** |
| Drinking milk, fermented products, fresh cottage cheese, million tons | 6,4 | 1,1 |
| Cheese, thousand tons | 183,8 | 128,6 |
| Powdered milk, thousand tons | 61,1 | 34,1 |
| Condensed milk, thousand tons | 166 | 74,5 |
| Butter, thousand tons | 441,1 | 89,2 |
| Milk consumption per capita population, kg | 373 | 221 (185) |
()* Expert review
** In physical terms (in terms of basic indicators 4.1 million tons)
*** Data 2019 year
In 2021, the decline in production continued. In 2021, 8.72 million tons of milk were produced in Ukraine, including agricultural enterprises produced 2.75 million tons of milk (0.4% less), households – 5.97 million tons (8.2% less).
Most milk was produced last year in the Poltava region – 691.8 thousand tons (5.8% less than in 2020);in second place – Vinnitsa (684.9 thousand tons; 6.2% less); in third place – Khmelnytsky (643.8 thousand tons; 1.2% less) region.
The smallest volumes of milk production for 2021 were demonstrated in Luhansk (102.0 thousand tons; 7.8% less than in 2020),Donetsk (144.1 thousand tons; 7.6% less) and Zaporozhye (180.6 thousand tons; 10.6% less) regions.5
In 2020, there were 424.5 thousand cows in Ukraine. This is 1.9% less than a year earlier.4 In terms of 100 hectares of agricultural land, this is very small. In Poland, there are 26 cows for every 100 hectares. In Germany, there are about 40 cows for every 100 hectares. But in Ukraine there are only 4 cows for every 100 hectares.6 The average productivity of a cow in agricultural enterprises is 6.21 tons of milk per year.7
Import of dairy products to Ukraine is growing. These are mainly cheeses and butter from Europe. Export of dairy products from Ukraine is also increasing. But this is at a slower pace than imports. Basically it is milk powder, butter and condensed milk. These products are supplied to Asian and CIS countries.
In 2021, the value of imported dairy products amounted to $372.8 million, which is 25% more than in 2020.In 2021, the value of exports of dairy products amounted to $178 million (in 2020 – $172 million), accounting for less than 48% of imports (in 2020 – 58%).8
In 2021 processing enterprises bought milk at the following prices:
Extra grade — $0.37 (UAH 10.21)/kg, highest grade — $0.35 (UAH 9.81)/kg, first grade — $0.33 (UAH 9.26)/kg, weighted average price of three grades — $0.35 (UAH 9.76)/kg (prices without VAT).4 Prices in dollars are indicated at the rate of 27.3 hryvnia per 1 dollar.10 Purchase prices increased by 12% for 2021.11 Retail prices for milk in stores increased by 15%. Average price of drinking milk $0.8 22 UAH/kg.12
The average payback period for a dairy farm is 5 years.6
The main problems of the industry are:
- More than 70% of milk does not meet European standards either in terms of composition or bacterial safety;9
- Imported milk is cheaper;1
- No cow feed market;
- A significant part of the farms has outdated equipment and low-yielding cows;
- Inefficient government support programs;
- Russia’s restriction on the export of dairy products from Ukraine;6
- The specifics of the land market stimulates crop production and not animal husbandry;
- Processing enterprises underestimate the price of low-grade milk, which is produced by most households.4
How the war affected the industry
Russian troops captured the Kherson region and part of the Zaporozhye region. Not much milk is produced in these areas. However, the destruction of infrastructure, the rise in fuel prices, and the shortage of electricity will greatly reduce production. In 2022, production may decrease by 13.3-15.9%. Demand for milk may be reduced by 18-20%.13 However, dairy prices will increase by 30-35%.14
Ukrainian farmers continue to work. From January to August 2022, 59.4 thousand tons of dairy products were exported. This is almost equal to the data of the same period last year. But the import of dairy products to Ukraine has declined. From January to August, 42.3 thousand tons of dairy products were imported, which is 37% less than in the same period last year. The reduction in imports is explained by its structure. Ukraine mainly imports cheese. But this expensive product was in low demand during the war.15
Cow in the yard. Inside view
In areas near the fighting, the cow becomes a walking source of prosperity. Elena, a resident of the village of Malotaranovka, said that her cow gives about 25 litres of milk every day. Elena does not know the quality of this milk. She does not hand over milk to processing plants. But, Elena sells milk on the road next to her house. She does not pay for a trading place and does not pay taxes. One litre of milk costs $0.68 (UAH 25)/kg. At the official rate of 36.56 hryvnia for 1 dollar.16 Milk in the store is more expensive. Prices start from 0.82 (UAH 30)/kg. Therefore, people willingly buy Elena’s milk.
Free cow food. Donbass has a good climate and a lot of land without an owner. Cows can be grazed in the meadow from April to November. Sometimes cows are grazed in the fields even in December. This is the golden age for cow owners. Free feed and no taxes allow cow owners to receive about $17 or 675 hryvnia per cow per day. This is very big money. The average pension in Ukraine is $119 or 4370 hryvnia.17 The base salary of a Ukrainian soldier is $820 or 30,000 hryvnia.
In winter, the income from the cow is less. You need to buy food. Hay is very expensive and scarce. Peasants buy straw. A bale of straw weighing 15 kg costs about $1.6 or 60 hryvnia. A cow needs at least four of these bales a day. But if you feed only straw, the cow will not give milk. Peasants add grain to feed.
One recipe is to halve the mixture of barley and corn. Barley and corn are crushed in a huller. We need about 6 kg of this mixture per day. It costs $0.82 or 30 hryvnia. Barley and corn cost $0.18 or 5 hryvnia per kg. As a result, feed for a cow costs $7.2 or 270 hryvnia per day ($6.4 straw and $0.82 a mixture of barley and corn). Milk yield is less in winter. But the cost of milk in winter increases by a few cents per litre. As a result, the total profit is reduced by almost a third. But it is at least $10 per day per cow. For poor Ukraine, this is a big income. Everything would not be so good if the peasants paid taxes and fees for trading places. But fortunately, the archaic way of life and the imperfection of local authorities make it possible not to do this.
The war only strengthens this trend. The cow becomes a source of hope and prosperity in an era of instability. This allows us to hope that, at least in private households, the production of dairy products will begin to increase.
References
1. https://latifundist.com/novosti/48941-proizvodstvo-moloka-v-ukraine-samoe-nizkoe-za-100-let–chagarovskij
2. https://latifundist.com/novosti/52157-v-realnosti-ukraina-po-proizvodstvu-moloka-v-mire-zanimaet-32-mesto-a-ne-18–chagarovskij
3. https://delo.ua/business/za-30-let-kolichestvo-molokozavodov-v-ukraine-so-373747/
4. https://delo.ua/business/novye-standarty-i-sokraschenie-pogolovja-chto-pr-380682/
5. https://www.epravda.com.ua/rus/news/2022/01/20/681610/
6. https://www.ukrinform.ru/rubric-economy/3213950-import-molocnyh-produktov-budet-li-ukraina-s-ukrainskim-molokom.html
7. https://latifundist.com/novosti/48909-apm-predstavila-naibolee-produktivnye-molochnye-hozyajstva-v-2019-g
8. https://uadairy.com/pokaznyky-zovnishnoyi-torgivli-molokoproduktamy-u-2021-roczi/
9. http://milkua.info/uk/post/ukraina-zanimaet-11-mesto-v-mire-po-proizvodstvu-moloka-no-kakogo
10. https://www.epravda.com.ua/rus/news/2021/12/21/680863/
11. https://news.obozrevatel.com/economics/fea/molochka-v-ukraine-znachitelno-podorozhala-chto-budet-s-tsenami-v-2022-m.htm
12. https://money.comments.ua/news/argo/v-ukraine-ezhemesyachno-dorozhaet-moloko-kak-otlichayutsya-ceny-v-regionah-685416.html
13. http://www.fixygen.ua/news/20220408/proizvodstvo.html
14. https://focus.ua/economics/529086-dorogaya-eda-kak-v-ukraine-dorozhaet-myaso-moloko-i-drugie-produkty
15. https://www.vetfactor.com/ru/news/ukrainskii-eksport-molochnoi-produktcii-dostig-dovoennogo-urovnya/
16. https://minfin.com.ua/currency/nbu/
17. https://ru.slovoidilo.ua/2022/05/03/novost/politika/nachala-goda-ukraine-vyrosla-srednyaya-pensiya
18. https://vikna.tv/ru/dlia-tebe/robota/zarplata-vsu-vo-vremya-voennogo-polozheniya/
