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The Ukrainian dairy sector is developing rapidly. In recent years, the overall milk output and quality of dairy products have improved significantly. However, the recent devaluation of the Ukrainian currency, combined with a global decline in milk prices and the trade barriers with the Russian Federation, which was absorbing 80 percent of Ukraine’s dairy exports – has affected margins in this sector and put more pressure on farmers to further increase productivity and efficiency.

With this in mind, the FAO Investment Centre and the European Bank for Reconstruction and Development (EBRD) organized a study tour to the United States for the members of Ukraine’s Dairy Working Group (WG), which was created in the context of a joint FAO/EBRD project that supports policy dialogue in Ukraine’s dairy sector. The tour was an occasion for the Working Group – composed of Ukraine’s main industry representatives and policy makers – to visit leading milk production regions in the USA and share views with top-notch experts in milk production technologies.

From 7 to 14 December 2014, Ukraine dairy experts travelled to Illinois, Wisconsin and Minnesota to visit model farms, dairy processors, research and extension centres using the most advanced dairy technologies and to meet with Land O’Lakes, one of the leading farmers’ cooperatives in the country.

Discussions during the week’s visit focused on modern dairy business practices and cooperative development, with an emphasis on new feeding approaches and ways of increasing milk productivity. Participants exchanged directly with their peers on dairy technology and management practices, including the maintenance of herd health as well as forage and feeding programs. They also visited two types of farmers’ cooperatives to learn about their business model and internal governance. Meetings with forage and dairy scientists, researchers and extension services helped the Ukrainian delegation to understand how knowledge and innovation management is handled in the American dairy sector.

Bringing dairy sector representatives and policy makers around the table

The tour was one of many activities that make up the FAO/EBRD project supporting Ukraine’s dairy sector. The project is also facilitating the implementation of preliminary recommendations based on an in-depth market study carried out by FAO. In particular, it helps improve the focus and consistency of Ukraine’s dairy policies and encourages a more active dialogue between the public and private sectors on policy related issues.

The project was launched in April 2013 and started with the organization of a national Dairy Forum, in close collaboration with the Ministry of Agriculture and Food of Ukraine. As a result of the meeting, the leaders of the three leading industry associations – the Ukrainian Association of Milk Producers, the Union of Dairy Companies Association and the Ukrmolprom Association agreed to step up their interactions with the government authorities on policy issues and, with support from FAO and EBRD, decided to establish, together with the Ministry, a consultative WG.

Composed of government and industry representatives, the WG was officially formed in June 2013 with the mandate to focus on improving legislation related to primary milk production and taxation, other regulations in the sector, as well as marketing issues and market prices. It has already helped improve the transparency and predictability of dairy policies and resolve a series of long-standing issues.

Steps alone are strides together

In only eighteen months, the WG  has proposed concrete revisions to existing legislation and contributed to drafting new regulations in areas such as the identification and registration of animals, feed and food products, agricultural cooperation, and the production of organic agricultural products.

The WG also engineered an agreement between milk processors and the Ukrainian Government allowing for dairy companies to sell dry milk and butter to the Agrarian Fund of Ukraine, which was eventually signed in May 2014. The milk processors who agreed to maintain milk procurement prices – at a minimum of 4.2 UAH/l for industrial farms and 2.5 UAH/L for household farms – were able to participate in the tender. Thanks to this move, the Agrarian Fund of Ukraine was in a better position to guarantee milk supply in the winter months when supply generally decreases.

The WG also swiftly responded to the Russian trade ban on Ukrainian dairy. The ban resulted in the loss of a very significant export market, accounting for 80 percent of Ukraine’s dairy exports. Thanks to the strong coordination among industry stakeholders, the total revenues from dairy exports remained nearly unchanged in 2014 from the previous year. Moreover, the ban encouraged several Ukrainian dairy companies to go through the certification process required for exporting to the European Union. Such certifications are an opportunity for accessing an important new market and for the sector to grow.

The next project activity is to help the Ukrainian dairy industry to organize its 8^th International Dairy Congress from 3 to 5 March in Kiev. The event will host more than 1 500 participants from multiple countries, with the participation of all leading Ukrainian dairy companies.

Photo credit: Flore de Préneuf / World Bank, “Making cheese in Besarabsky Market, Kiev, Ukraine”.