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FAO helps strengthen dairy sector in Ukraine

FAO support for Ukrainian dairy sector is paying off.

Key facts

Ukraine’s commercial dairy industry is beginning to recover from a sharp decline in recent years, producing higher quality milk and tapping into new foreign markets. This recovery has come despite ongoing political and economic turbulence in Ukraine and global milk prices dropping to an all-time low. Progress is due in no small part thanks to FAO and the European Bank for Reconstruction and Development (ERBD), which both supported the establishment of the Ukrainian Dairy Sector Working Group (WG) in 2013. The dairy sector WG is a collaboration of leading milk producers and processors, key industry associations, scientists, analysts and government representatives. The group aims to develop transparent dairy policy mechanisms and commonly accepted milk market indicators, while strengthening capacity and providing solid market analysis and legal advice through effective dialogue between the public and private sectors. As a result of FAO’s knowledge and facilitation support, the WG is significantly contributing to making Ukraine’s commercial dairy industry more modern, productive and sustainable than ever.

The milk and dairy sector in Ukraine is showing signs of recovery after a period of stagnation in which producers in the net-exporting country struggled to deliver high-quality raw materials. With support from FAO, the European Bank for Reconstruction and Development (EBRD) and the Ukrainian Dairy Sector Working Group (WG), the sector is now starting to show signs of greater efficiency, productivity and inclusivity.

The WG has been instrumental in introducing changes to Ukrainian government legislation – including new quality and safety standards – and in developing the investment case for industrialization. Regular discussions about dairy sector news, key legislative initiatives, standards and market trends between the Government and the private sector have become an important tool for facilitating transparent policy-making.

“Active dialogue between agribusiness companies and the Ukrainian government is a key factor in contributing to sector development. It has created a more transparent policy environment conducive to investment and it is helping to diversify export markets for dairy products,” says Victoria Zinchuk, Head of Agribusiness Advisory at the EBRD.

Transferring knowledge
Keeping dairy producers and industry experts abreast of the latest news and technical know-how plays a crucial role in the transformation of the dairy sector. With this in mind, in 2014 FAO and the EBRD organized a study tour for members of the WG that took in some key milk-producing regions in the United States.

While visiting farms, dairy cooperatives, a dairy processing plant and research and extension centres, the group gained valuable insights into new technology and production methods as well as modern dairy business practices.

“Farms in Wisconsin account for 14 percent of all milk produced in the United States and we learned about the whole dairy value chain of this State – from scientific research, applied research and extension services, to commercial production, processing and cooperatives,” said Denys Serhiyenko, Director of Dairy Farm “Ponory” Ltd. 

“I have participated in many dairy study tours in my life but this was the best of all. I learned a lot about technologies for calf feeding, animal breeding, growing alfalfa and feed production. Technological approaches used in this US cheese factory led us to rethink our cheese-making process, a change we are now implementing in our factory,” added Anatoliy Volkov, Director of “Plemzavod Stepnoy” Farm.

High-level events, such as the 2016 Eastern European Dairy Congress in Kiev –  which attracted more than 2 000 dairy farmers and industry players from various countries – have promoted not only the exchange of ideas but also of technology and market knowledge.

This has led to several benefits, including helping farmers to upgrade facilities and improve the quality and quantity of milk produced.

Breaking new ground
Welcoming Ukraine’s efforts to expand trade, China and the European Union opened up their markets to several Ukrainian dairy companies in 2015. And recent trade missions to countries in the Middle East, sub-Saharan Africa and Asia have also helped in the search for new market opportunities for Ukrainian dairy products.

Of those products, cheese remains particularly important, but Ukraine has also increased its exports of skimmed milk powder, butter, ultra-high-temperature processing (UHT) milk, cream and fermented milk products, thus creating new possibilities for dairy producers.  

However, FAO economist Andriy Yarmak believes that while most farmers make an annual investment in production expansion, they would be much better served by investments in processing technologies.

“To produce one litre of milk is ten times more expensive than processing the same quantity of milk.  Instead of spending money investing in the production of milk, farmers could use the same funds to create a processing plant aimed at producing high quality dairy products for both domestic and export markets,” he says.

Yarmak evidences this with a real example of a Ukrainian dairy company that, after deciding to invest in an entirely new production line, has gone on to develop a product exclusively for the Chinese market.

Strength in numbers
Recognizing the benefits of strength in numbers, the Association of Milk Producers in Ukraine, one of the most active WG members, is now developing a cooperative of milk producers to add value through processing. 

Around 20 larger-scale farmers are currently working on a business plan, while five have already joined forces, selling their milk collectively and earning around 10 percent more.

“It’s amazing what can be done if you really have the energy to push it,” says Andriy Dykun, President of the Association of Milk Producers in Ukraine.

And it is this spirit of working together, of giving all players a say in important policy decisions, that demonstrates WG’s progress in transforming Ukraine’s dairy sector for the better. 

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