Ukraine: Industrial farms to ramp up milk production by 50%

Individual farms remain the dominant force in the Ukrainian milk market, but the balance of power is likely to tilt towards the industrial segment in the coming years. Photo: Canva

The industrial sector of the Ukrainian milk industry is expected to boost output by 50% in the next 2 years due to major investments, Vadim Chagarovsky, head of the Union of Dairy Enterprises of Ukraine, told local news outlet Agroportal.

As of 1 January 2024, the Ukrainian dairy herd comprised of 1.35 million cows, of which 390,000 belong to the industrial sector and 960,000 to the so-called private sector, consisting of small individual and backyard farms, Chagarovsky indicated.

Milk production in Ukraine

Chagarovsky’s insights reveal a stark contrast in the milk processing capabilities of industrial farms and individual farms. While industrial farms contribute a significant 94.5% of the milk for processing, individual farms process a mere 12% of their milk output. This disparity is evident in the 2023 figures, where almost 3 million tonnes of milk were processed in Ukraine, with industrial farms providing 2.7 million tonnes and independent farms contributing only 300,000 tonnes.

Individual farms remain the dominant force in the Ukrainian milk market, but the balance of power is likely to tilt towards the industrial segment in the coming years. In 2023, Ukraine manufactured 7.34 million tonnes of milk, of which 4.54 million tonnes came from independent farms and 2.8 million tonnes from industrial farms.

Despite the ongoing hostilities, every second Ukrainian milk farm expressed readiness to invest in operations.

The Union of Dairy Enterprises expects industrial farms to have 441,000 heads by 2025, which will manufacture around 3.45 million tonnes of raw milk per year, Chagarovsky indicated. In the segment of individual farms, on the contrary, output is predicted to shrink due to a mix of natural factors.

New state aid scheme for dairy

Expanding state aid can further help industrial farms in Ukraine to ramp up production performance in the coming years. A new state aid scheme is in the works, designed to provide crucial support to milk producers and processors. This initiative, unveiled by Taras Vysotsky, first deputy minister of Agrarian Policy and Food, aims to create a level playing field for Ukrainian dairy and their European competitors.

Among other things, the government seeks to support the dairy industry through soft loans with a state-subsidized interest rate ranging between 5% and 7%. Since 30 April, Ukrainian milk farms are able to obtain a loan of up to 150 million hryvnia (US$3.7 million) under this programme. Vysotsky stated that Ukraine should additionally support those production sectors that have support from European structures and national governments in the European Union.