This year, Ukrainians may not find Ukrainian milk products in stores - dairy farms are threatened with complete closure.

On the eve of the New Year, business owners received notifications from milk processor factories about 10% reduction of raw milk purchase. This opinion was motivated by unprofitability of production due to sharp rise of gas prices. At the same time, for dairy farms, such a sharp decline in prices means bankruptcy and closure - production will not survive under such conditions.

Farmers are outraged by partners’ behavior because the decision to reduce the price was unilateral, without discussion and completely unexpected.

"Year 2022 for Ukrainian farmers once again began with "surprises". This time they are about a dairy industry. A few days before the New Year, all farmers received an "incredible greeting" from their milk processing partners, or rather a message about the reduction in milk prices. Without any warning, the processors agreed to give us a real price démarche. And this is due to the total crisis in dairy farming across the country! Reduction of the price by 10% will destroy all farms with less than 500 dairy herds,” commented a situation a member of the UAC and the Association of Milk Producers (AMP) from Khmelnytsk region Ihor Hai.

The situation for farms is catastrophic, as the cost of milk production has increased significantly: prices for mineral fertilizers and logistics have tripled, costs for protein feeds have increased by 40-50%, the price for even home-grown feed has increased by 40% and veterinary medicines by 25%.

The situation is also critical for farms with up to 500 cows. But there are more than 1,500 such farms in Ukraine, and together they keep almost half of all industrial livestock. A member of the AMP and Chairman “Krasnohirske” LLC from Cherkasy Region Olha Polozova has such an enterprise. She notes that due to significant investments in a short time to modernize the farm, as well as due to the doubling of production costs over the past two years, dairy farming is a day-to-day struggle. She adds that an increase of gas and electricity tariffs is as devastating for dairy farms as it is for factories.

Even for the top dairy farms in the region, which include a member of AMP “Agroko” LLC from Cherkasy region, which has been investing in development for the last years, the situation calls into question further investments: “These circumstances encourage farms to stop the development of the dairy industry. For the vast majority of dairy farms, further work will become economically unviable and will lead to losses and liquidation of enterprises!" said animal husbandry director at "Agroko" LLC Volodymyr Tarandushka.

Dairy farms mostly exist through subsidies from crop production. However, under such conditions, farm owners are not ready to continue to subsidize the dairy industry.

"Milk producers increase the share of high-quality milk, there are new farms in the country, and huge sums of money are being invested in modernization and construction. What happens in a processing industry? Cheap gas has made dairy producers to work relaxed and no one has thought about energy efficiency. The retailers, with which the processors have built a dialogue, are playing a dishonest game, abusing pricing and payment deadlines for finished products. Processors have become hostages of well-known retail chains! Import from Poland and Belarus have flooded our shelves,” said Сhairman of the “Trading House “Dolinskoie”, member of the UAC and AMP from the Kherson region Volodymyr Khvostov.

Farmers are convinced that a constructive dialogue between producers, processors and the state is needed to preserve the dairy industry. The UAC Chairman Andrii Dykun also emphasizes this: both producers and processors need discuss this problematic issue and work out a common position on the development of the dairy industry.

"We are reducing the number of dairy farms and dairy plants. But the number of retail chains that have grown at the expense of agricultural producers is increasing. Therefore, we must work together to develop a strategy for the development of the dairy industry. We have been working on the development of such a strategy with the World Bank for two years now and we are very short of partnerships with processors,” said Andrii Dykun.

The first dialogue at the initiative of the Ministry of Agrarian Policy between market participants, deputies and relevant associations has already taken place. Farmers support the position of the agency and call on dairies for dialogue:

"There is a reduction of dairy farms and milk processors. But the number of retail chains that have grown at the expense of agricultural producers is increasing. Therefore, we must work together to develop a strategy for the development of the dairy industry. We have been working for two years on the development of such a strategy with the World Bank and we are very short of partnerships with processors,” said Andrii Dykun.

Farmers support the position of the agency and call on milk processors for dialogue:

• to create a working group with the participation of milk producers and processors;
• jointly develop a draft bill on the basis of principles of trade in food products;
• to stabilize the situation, revoke the protocols for reducing of raw milk price, which were sent by the factories to milk producers