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Ukraine milk production set to shrink

Milk production in Ukraine may shrink by 12.3% between 2018 and 2030 from 10 million tonnes to 8.8 million tonnes as part of the ongoing consolidation in the industry, Ukraine’s Institute of Agrarian Economy said in a report released 26 September.

The production in backyard farms is expected to reduce by 31.1%, while commercial farms would be able to boost their output by 38.7% during this period to 3.8 million tonnes, Olga Kozak, senior analyst of the Institute of Agrarian Economy said. As of today, the backyard farms account for roughly 70% of milk production in Ukraine, but their share has been seen falling during the past few years and this trend is likely to continue during the coming decade.

The biggest farms, those with a dairy herd above 500 heads, would be able to boost production by 60% between 2018 and 2030, so they would account for 30% of the overall milk production in Ukraine, the Institute of Agrarian Economy said.

The dairy herd in Ukraine is set to slump by nearly 30% until 2030, as compared to the previous year, and dairy farms are likely to experience a 46.7% fall in milk cow population, the Institute of Agrarian Economy forecasted. Some slight reduction in the dairy cow population is also expected in the segment of commercial farms with a population below 500 heads.

The rapid fall in the number of dairy cows in Ukraine could be partly offset by improved efficiency. It is expected that between 2018 and 2030 the average milk production per cow in Ukraine could jump by 40.4% to 7 tonnes per cow per year, despite the fall in the overall production.

Photo: Vladislav Vorotnikov
Photo: Vladislav Vorotnikov

Shrinking profitability

One of the reasons why milk production in Ukraine is expected to fall is the reduction in profitability in the industry, especially among the backyard farms. In 2018, it went down by 14.1% as compared to the previous year, the Institute of Agrarian Economy said. The picture is worse among the backyard farms, where some portion of the industry is making a loss.

Andiy Yarmak, an analyst of FAO in Ukraine earlier this year reported that the profitability of milk production in the country hit record lows. Yarmak estimated that at the beginning of the year it was by 8%. While the start of 2018, due to different factors, was one of the lowest levels seen in the past several years.

The overall milk production in Ukraine has been gradually declining over the years. In 2012, the production reached its peak of 11.4 million tonnes in 2012, but shrank to 11.1 million tonnes in 2014 and to 10 million tonnes in 2018, the State Statistical Service of Ukraine estimated.

Ukraine officials have been repeatedly blaming the rising costs in the industry and the weak purchasing power of the population as the main factors affecting the milk production in the country.