Urgent state aid is needed for the Ukrainian dairy sector

The Ukrainian Parliament discussed the current situation of the dairy industry on 8 February. According to Arsen Didur, executive director of the Ukrainian Union of dairy industry enterprises, the main topic on the agenda was the complaint from the milk processors about a sharp deficit of raw milk. In 2023, the cow population in Ukraine dropped by 4% to 1.29 million heads, the preliminary calculation of the Ukrainian Agricultural and Food Ministry showed. The shortage adds pressure along the entire value chain, driving prices higher. For example, the average price of butter on the Ukrainian market last year jumped by 40%. “The average capacity utilisation ratio [of Ukrainian dairy processors] is 50% to 60%. This impacts production costs and competitiveness,” Didur told the local newspaper, the Telegraph. Without state aid, milk companies will neither modernise their production capacities nor maintain operations at the level of last year.

The issue appears so tense that Ukrainian food security might be on the line. Didur indicated that the National Security and Defense Council of Ukraine, in order to not let the situation in the dairy industry deteriorate further, had issued a decree ordering the authorities to embark on the 10-year development plan. Without it, the industry will be doomed for gradual weakening. “If we do not stimulate milk production and increase the number of livestock due to state support,” Didur said, “then we will constantly have a deficit. Consequently, of course, there will be a high price for raw materials. Now we are already losing some foreign markets due to increased costs,” he said, adding that the domestic market would be lost. “If today we have already lost it significantly in cheeses, then tomorrow we will lose it in cottage cheese, as well as in the same dairy products.”

However, the Ukrainian 2024 national budget has already been put together with no extra funds to support the dairy business. Any aid the lawmakers approve for the sector will not come earlier than 2025. In the meantime, the big question is whether the already strained national budget can afford subsidies to milk manufacturers.