Power outages disrupt Ukraine’s dairy sector

The Ukrainian dairy market is currently also in turbulence since the supply chain has been hit due to an unstable energy grid.

Blackouts, both scheduled and unscheduled, have become common in many parts of Ukraine since October as Russia aims regular waves of missile and drone attacks at parts of the energy infrastructure. The Ukrainian government estimated that these strikes damaged more than 30% of the energy infrastructure in the country.

“In the dairy industry, some stages of work should not be suspended and require the constant operation of electricity-powered systems or units so that the product is not spoiled,” Gopka said.

Currently, industrial companies across Ukraine are trying to adjust their business to scheduled power outages. However, this is a tricky task since unscheduled or emergency blackouts remain frequent.

“Due to emergency shutdowns, dairy processing plants will not be able to process all raw materials on a full scale, from private and industrial farms, which are temporarily not allowed to significantly increase the [farmgate] milk price,” Gopka said.

Backup power sources

Currently, most Ukrainian food companies are struggling to establish backup power generation sources. The country lacks diesel generators and it takes several weeks to deliver purchased diesel generators from Europe to use in Ukraine. A large number of diesel generators come to the country as a part of the humanitarian aid, but those are primarily distributed to support the social infrastructure, such as hospitals, schools and shelters.

“Due to the use of generators, which dairy processing plants receive, the retail price is likely to rise,” Gopka said, referring to the fact that the average price of electricity from diesel generators is several times higher compared to that obtained from the common energy grid.

“The use of generators will be widespread during winter. An increase in import supplies can partly restrain the rise in price for dairy products on the market.”

The analyst added that the increase in imports would be very likely if blackouts become more frequent, which will force dairy plants to scale down operations.