The mail with new data was sended to your account Thank you for your registration.
28 March 2024

News

31.05.2012

Adding milk to the list of government price regulation threatens the bankruptcy of farms and milk processing companies

May 22, 2012 Verkhovna Rada of Ukraine adopted on the first reading the draft law #10456 “On Amendments to Article 3 of the Law of Ukraine “On State Support of Agriculture in Ukraine” in regulating purchasing prices for milk”, which proposes the milk in the list of government price control. It suggests processors must make payment for milk in seven business days. Experts and market participants think such legislative initiatives may lead to higher prices for dairy products and outflow of investment in industry.

To prevent the negative impact of the draft law, Association "Ukrainian Agribusiness Club" decided to address letters to the Chairman of Verkhovna Rada Committee on Agrarian Policy and Land Relations Grygoriy Kaletnik , Chairman of Verkhovna Rada Volodymyr Lytvyn, Deputy Chairman of Verkhovna Rada Mykola Tomenko and heads of fractions in Verkhovna Rada with request to cancel the adoption of this draft law in the current version or provide it timely payments not only from suppliers of raw milk, but with processors for the production of dairy products.

The consequences of prohibition of cheese export to Russia were negative for the entire dairy industry. Enterprises, production of which was oriented to export cheese to Russia, reduced the volume of milk purchases, which together with the seasonal increase in the supply of milk (and in accordance with the seasonal decrease in prices) negatively affected the market. According to State Statistics, for the period January-April 2012 all categories of farms have produced 3 million tons of milk, while in the same period last year output totaled 2.9 million tons.

For agricultural enterprises national average price in April 2012 was 3 UAH / Kg compared with 3.5 UAH / Kg in February, for households - 1.8 UAH / Liter compared with 2.5 UAH / Liter. For many market players milk production became unprofitable because the cost varies in the range 2,3-2,5 UAH / kg.

Besides the prohibition of exports, a significant cause of lower prices for raw milk is a high seasonality of production in Ukraine. Significant growth in milk production falls in April-August, respectively, during this period prices on the market annually reduced. Lower prices - a common European trend, but compared to other countries, in Ukraine seasonality of production is extreme excess, which causes extreme prices of raw milk.  

This year to the problem of seasonality added also reduce the demand on foreign markets for dairy products (lower world prices), leading to decrease in exports of dairy products from Ukraine and growing supply of raw milk and the lack of working capital for the purchase of milk farmers (in the production of cheese costs from the sale of the product come in 4 months or more).
Rather than solve these series of urgent problems and save the dairy industry, lawmakers plan to the contrary, they add. In particular, the draft law №10456 “On Amendments to Article 3 of the Law of Ukraine “On State Support of Agriculture in Ukraine” in regulating purchasing prices for milk” implies that processors must pay for milk for 7 days after its delivery to the enterprise. However, in this version of the draft law provides the calculation of the processors by the wholesale and retail only for processed liquid milk, which is 8% in the structure of industrial milk processing. Thus 92% of milk-raw materials are used to produce other dairy products, including so-called storage groups - dry skimmed milk, dry whole milk, butter and cheese and other products of long-term storage.

“Today processors are hostage of situation when the delay of payments by retailers in a large quantity for dairy products amounts 30-60 days. Thus, the demand for pay from suppliers of raw milk, within seven days while a much longer period of payment with processors - up to 60 days - require the involvement of credit for procurement , which in turn affect the cost of finished goods and the financial condition of dairy enterprises”, – said the president of the Association "Ukrainian Agribusiness Club" Alex Lissitsa.

According to specialist, such changes in the legislation would cause a forced reduction in purchase of milk for processing due to shortage of working capital or a more rapid reduction of purchase prices. However, due to additional costs for servicing credit for the purchase of milk level 4% of the milk can occur higher prices for finished products and reduction in production of dairy products.

“In addition, leaching of working capital will affect the investment in the development of dairy industry, in particular, expansion and modernization of production capacity, improve product quality, distribution system etc. In addition, the adoption the draft law - a direct threat bankruptcy of farms and milk processing companies,” - added Alex Lissitsa.

Additional information by phone: +380 44 201-49-50
E-Mail: [email protected]
UCAB Press Office

Tetiana Kotyk




  • Baker TILLY
  • Agroresurs
  • AMAKO
  • Limagrain
  • Zeppelin
  • Amazone
  • LNZ Group
  •  Agricom Group
  • horsch
  • uahk
  • Сygnet
  • Syngenta
  • Agco
  • Agroregion
  • Eridon
  • MHP
  • Maschionet
  • Maisadour
  • DuPont Pioneer
  • Agroscop
  • Agrimatco
  • NCH Advisors
  • Continental farmers Group
  • credit agricole
  • claas
  • john deer
Congratulations! You are subscribed to Ukab news