Ukraine’s dairy industry has been facing significant conflicts between milk producers and processors for many years, leading to price instability and financial losses for both parties. In an effort to reduce these conflicts, the Ukrainian government has implemented legal reforms aimed at improving transparency and fairness in the dairy supply chain. Chairman of the Ukrainian Dairy Union Arsen Didur recently told the local publication Telegraph that milk processing has entered its worst period since the start of the Russian invasion.
“Consumer optimism is low. Didur stated that exports have nearly ceased, attributing this, among other things, to errors made by the Ukrainian government in bilateral customs relations with the Central Asian nations of Uzbekistan and Turkmenistan. Among other factors that have a significant impact on the Ukrainian dairy industry, he cited the high cost of raw materials relative to the European Union, the absence of government support, and the difficulty of obtaining bank loans.
In addition, Ukrainian dairy manufacturers face payment delays from retail chains. Didur warned that a proposed increase in energy prices by the government could be the “last straw” that leads to widespread bankruptcy in the sector.
Help is on the way
In the meantime, the Ukrainian parliament, Verkhovna Rada, has recently introduced new legislation to alleviate tensions in the troubled dairy industry. One proposal would reduce the VAT on dairy products from 20% to 10%. If adopted, this measure would apply to both domestic and imported products.
The agrarian policy minister, Nikolai Solsky, stated that the new legislation should aid legal businesses in their fight against the shadow sector. When the measure is enacted into law, he is confident that dairy producers who do not pay taxes will forfeit a portion of their profits.
Self-regulation is being considered.
In addition, the Ukrainian government intends to implement a commodity checkoff programme.
In accordance with a proposed law, market participants will be required to contribute 0.5% of their revenue to a specially established fund intended “to promote dairy products, advance innovation, combat fraud, and develop new production standards.”
“This will allow the state to transfer a portion of the functions that industry representatives will handle better than anyone else,” Solsky explained, adding that this plan is comparable to the one adopted in the United States. On the other hand, he vowed that it would be implemented only if Ukrainian dairy farmers expressed interest.
