The association Ukrainian Agribusiness Club feels sure that there will be no traditional milk price cuts in Ukraine this year. UAC experts say that, unless the government promptly changes the dairy business support strategy, supplies will drop so low this fall that shortages will appear in retail outlets.
Purchase price stability, even a slight increase this June, has been duly noted by the State Statistics Committee. Whereas in May 2011 milk purchase prices went down by four percent, which is traditional for the summer season, at the beginning of June these prices stopped decreasing — in agribusiness and the private farming sector — and even registered an increase in some regions. “At present the price for top and superior quality milk supplied by agricultural enterprises exceeds 3.5 hryvnias per kilo,” says UAC agrarian market expert Inna Ilienko. According to the Milk Producer Association, as of June 7, 2010, superior quality milk was sold to suppliers at 3-3.2 hryvnias per kilo, that of top quality at 2.50-3.1, and first grade milk at 2.8 hryvnias.
Analysts believe this trend is explained by a tangible decline in the output of milk, along with increasing demand on the part of dairy businesses. Add here the unfavorable weather conditions. “This season has turned out to be very complicated for milk producers. The dry weather, problems with roughage supplies, a decline in milk yields under the heat wave, and the worsening of the quality of green fodder were among the reasons behind the 1.5 percent decrease in milk output at the agricultural enterprises in the first five months, compared to the same period last year,” explains Ilienko.
UAC experts stress that for highly effective businesses such a price stabilization is important for increasing revenues and restoring investment attractiveness. However, due to the new taxation clauses, farmers will also face problems. UAC President Alex Lissitsa is convinced that the main reason is the Tax Code whereby every milk producer has to pay 20 percent VAT, with the refund mechanism still to be adjusted by the government: “Twenty kopiikas per hryvnia ends up in a large sum for the agricultural producer.” Considering that the government hasn’t paid a single kopiika from the central budget to support the milk-producing farmer, it is clearly apparent that after the summer pasture season is over there will appear very big problems in the fall. Lissitsa predicts milk shortages in Ukraine starting in the fall: “Beef will cost less because they will start slaughtering cows while the milk prices will jump because there will be practically no milk left on the market.” We should not blame the agricultural producers, accusing them of profiteering — a favorite practice of our bureaucrats of late — because the problem is precisely the unprofessional performance of our government, insists Lissitsa.
