There are more than 400 companies related to the dairy industry of Ukraine. It is among the leading agro-business industries in the country. Before, dairy plant was present practically in every district center of the state.
Production capacities for Ukrainian milk processors exceed 18.5 mn tons, though the industry processed only 4.2 mn tons of raw milk in average in 2000-2004 and 5.2 mn tons of milk in 2004, according to official data. Capacities were loaded by only 25-35% depending on the output.
Annual milk yield during the Soviet era in Ukraine was over 20 mn tons. With such potential, Ukraine could have been an absolute leader of milk procurement in Europe. The disastrous reduction in livestock herds and decrease in dairy herd productivity since independence played havoc on the sector. As a result, only 12.6 mn tons of milk were collected in 2000 that was almost half of 1990 year index. However, the situation started to improve in the end of 1990s. Milk production volumes in Ukraine stabilized at the level of 13.7-13.8 mn tons over recent years. The slide in milk production stopped because of yield in family farms. Meanwhile, milk yield in commercial agricultural farms dropped many times. Milk production was 12.25 mn tons in 2007 that is 7.8% less than in 2006.
According to the State Statistics Committee, only 40% of the milk produced in the last years was industrially processed. Meanwhile, experts calculated that Ukrainian dairy industry had to utilize approximately 50% of the total production judging from production of dairy output.
Dairy plants procured the largest volumes of milk for production of butter, milk powder, or casein a few years ago. Now enterprises producing cheese became the leaders by volume of milk utilized.
The Ukrainian dairy industry is based on “three whales”, or three main directions of activities: whole milk output, cheese, and butter (plus milk powder and casein). Cheese and butter are the most raw stock consumption intensive products, though whole milk output is considered to be the most important, because it is a staple commodity.
Steady rise in the production volumes of practically all major dairy products is observed in Ukraine regardless of the commodity importance. The production of some goods increased several times lately with the most significant increase seen for cheese. Meanwhile, Russia introduced embargo on import of Ukrainian cattle breeding products in 2006-2007. Consequently, Ukrainian enterprises, for which Russia was the main sales market of dairy products (specifically, cheese) have at first significantly cut output. Production of fat cheeses melted down to 216 ths. tons in 2006. It was 3.2 times more than industrial index of 2000, but 21% less than in previous 2005 year. Whole milk output in 2007 increased roughly 3.3 times in comparison with 2000. The growth was small only in group of butter and casein. The year 2007 even faced curtailment of butter production by 3% and casein by 28% if compared with 2006.
Dynamics of major dairy output production in Ukraine (ths. tons)
Product
2000
2003
2004
2005
2006
2007*
2007 to 2006, %
Processed milk (fresh)
263
645
686
828
799
852
106.7
Milk and cream powder
72
89
105
113
106
125
117.9
Butter
135
137
138
118
102
99
97.1
Cheese and sour milk cheese
27
58
71
83
92
93
100.7
Fat cheese
67
173
224
272
216
244
113.1
Canned milk
49
78
104
104
97
113
116.5
Sour milk output
158
427
467
494
519
533
102.5
Casein and caseinates
25
16
21
18
13
9
72.5
Ice cream and consumer ice
98
112
116
121
119
129
108.4
* Estimated
The size of the Ukrainian dairy product market has recently expanded. Cheeses and some kinds of whole milk products were considered the most profitable before introduction of Russian ban. These articles account for a lion’s share in general production pattern. Producers increased output of milk powder articles in 2007 against figures of 2006 due to doubling of world prices.
The consumption of milk and dairy products has dropped noticeably since independence. Dairy products were one of the cheapest and most available foodstuffs before 1990. Meanwhile, the State Statistics Committee of Ukraine reports that dairy product consumption has grown over the last couple of years with the growth of personal income and the restoration of the national dairy industry.
Produced whole milk output is practically completely sold on the domestic market. A major part of the cheese, butter, and milk powder produced is exported.
Despite the significant drop of milk output in Ukraine since independence, the dairy industry produces much more than Ukrainian people consume. This surplus is successfully exported. Almost one third of the total milk processed by Ukrainian enterprises is exported as cheese, butter, milk powder, and other dairy products. The export of dairy products from Ukraine has been steadily growing over the last few years. Currency earnings from these exports exceeded USD 595 mn in 2007, thus 1.8 times outrunning results of 2006.
The import of dairy products to Ukraine is insignificant due to a number of reasons. However, certain kinds of high-quality cheeses, desserts, and yoghurts are imported to Ukraine.
Milk powder, cheese, whey, and butter are considered the most suitable for export from Ukraine in terms of revenues.
The export of milk powder leads the way in Ukrainian dairy deliveries by quantity as well. Export volumes are increasing yearly. Previously steadily high cheese export indices dropped in 2006 due to Russian embargo. Export deliveries of butter are less stable, and these figures are different each year.
Dynamics of major dairy products export from Ukraine (ths. tons)
Output
2000
2003
2004
2005
2006
2007*
2007 to 2006, %
Skimmed milk powder
49
51
63
56
64
58
90
Whole milk powder
3
8
18
20
17
18
105
Canned milk
5
15
27
21
10
13
124
Butter
31
18
42
21
13
4
35
Cheese
8
58
89
111
47
60
129
Casein
27
17
21
14
14
7
54
* Estimated
Ukrainian exporters deliver dairy products to a wide variety of states, though trade relations with Russia are the closest. Unfortunately, Russian ban resulted in essential curtailment of Ukrainian dairy output supplies. The share of dairy output export to this state in financial value made approximately 43% of the general segment export in 2007. Almost all export-oriented dairy products are destined there. Also shares of Algeria, Kazakhstan, Japan, and China are significant in export of Ukrainian dairy output.
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