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329834

Ukrainian dairy producers, especially small family farms, struggling to survive

Because much of the attention is focused on how Ukraine is going to export grain and oilseeds, less attention is being paid to other agricultural sectors like dairy. Yet, the consequences of the war on the Ukrainian dairy industry, which is the country’s second largest  sector of agriculture after crops, are devastating.

The majority of dairy farms in Ukraine are family-owned, with industrial farms accounting for about 30% of the total. Before the war, 10 regions – now occupied by Russia – produced 42% of the total volume of raw milk. Since the beginning of the Russian invasion, Ukraine has lost approximately 100,000 cows. In the occupied territories and territories close to military hostilities, milk production has dropped by 50%.

There are more than 100 milk processing plants across Ukraine. Currently, 37 Ukrainian milk processing plants are in the occupied territories. One of the biggest plants in Kupiansk (Kharkiv region), which specialized in canned condensed milk production, is occupied by Russians and has halted operations. As a result, a large number of dairy producers lost their buyers. 

A Struggling Industry

The dairy industry is experiencing the same logistical problems as the grain exporters (e.g. blocked ports, railway limitations, truck and driver shortages).

The milk producers and processors are in a financial trap. Supermarkets are delaying or even stopping payments to processors, which, in turn, means they cannot pay milk producers. Supermarkets are also in a dire situation as the major consumers of dairy products have fled Ukraine. It is currently estimated that over 8 million people have left the country, 90% of which are women and children.

The income of the population has also dropped drastically because of the war, which has added to decreased demand. Thus, dairy producers and processors are experiencing a lack of working capital. In some cases, milk processors accumulated such large volumes of dairy products that they refused to buy raw milk from producers.

Dairy producers are in a dire situation. More than 800 large industrial dairy producers are being affected by the consequences of the war. Almost all producers face shortages of fuel, spare parts, feed, and veterinarian medicine. Insemination services are mainly inaccessible, so many producers are forced to use the natural methods to maintain their herds.

In addition, labor on dairy farms has seen a drastic change. Many workers moved abroad or to safer regions. Some were conscripted into the military or joined as volunteers. Thus, there is a shortage of experienced operators, forcing dairy producers to hire inexperienced workers.

Even before the war, the Ukrainian dairy industry was struggling. About 30% of the milk produced in Ukraine met the minimal quality requirements and was considered tolerable by European standards. Only five Ukrainian milk processing plants were allowed to export their products to the European Union. The main export products were skimmed milk powder, butter, condensed milk, and dry whey. However, the standards in Middle Eastern countries, which is where Ukrainian products are also exported, are a bit different, so Ukraine can ship products without meeting European standards. 

Ukrainian dairy producers, especially small family dairy farms, are struggling to survive. They are searching for alternative ways to stay in business like starting their own processing and selling directly to consumers to bypass middlemen. This may prove to be challenging as investments into production and processing have ceased.

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