Improving the competitiveness of dairy products of Ukrainian producers in accordance with European standards
Authors:   National University of Life and Environmental Science of Ukraine, Pashchenko O. V. , Zharikova О. В. ,   National University of Life and Environmental Science of Ukraine, Faychuk O.V. ,   National University of Life and Environmental Science of Ukraine
Published: November 2020

These scientists point out that the market situation in Ukraine is favorable for the dairy industry functioning and the country has the appropriate prerequisites for its development: favorable climate, large areas of agricultural land, soil fertility, historical experience in farming, qualified staff and significant dairy market capacity. However, the authors reveal the presence of significant problems in the development of Ukrainian dairy subcomplex enterprises which requires further research in the industry development in the current conditions. The aim of the paper is to analyze and assess the main factors of raw milk competitiveness in accordance with the European quality requirements on the dairy complex of Ukraine, as well as analyze the problems of its development and ways to solve them. Currently, dairy enterprises production in Ukraine meet the high quality standards of the EU only partially. Therefore, the main task for Ukrainian producers is to ensure the high quality of both raw milk and the processed products. In addition, antibiotics and palm oil, pesticides, plant substitutes, milk substitution with water, etc. must be excluded from dairy products. According to the statistics, the total consumption fund in Ukraine, including exports and imports, is 9.33 million tons of milk. If we divide this figure by 42 million people of Ukraine, we get 221 kg of milk per capita. But if we divide the real figures - 6.68 million tons - by the real figure for the Ukrainian population - 36 million people - we will see that the consumption level is much lower - 185 kg per capita. Milk production decreased by almost 3.6% in Ukraine during the year. This drop was the most noticeable in cream and butter production, so it is not surprising that this niche was quickly filled by the importers. But what impedes Ukrainian milk industry development in the domestic market and its entering the foreign market? The only reason is low level of milk production. In Ukraine, the volumes in 2019 fell below 10 million tons for the first time. These data are confirmed by the recently published "Forecast of milk production in Ukraine by 2030: methods and calculations" submitted by Olha Kozak, a researcher at the Department of Economics of Agricultural Production and International Integration of the National Research Center "Institute of Agrarian Economics". According to the expert, the internal shortage of the product in 2019 was indicated primarily by the growth of the purchase price for raw milk, which for the last three months of 2019 was almost in line with the world prices or 10-15% higher than in the previous year. In October 2019, the price reached the maximum in hryvnia for the period of Ukraine's independence. Some experts in this field claim that our milk is more expensive than in Belgium, and this is nonsense. The experts predict a record decline in raw materials for 2020. In 2020, these processes will only intensify, causing structural changes in all components of the dairy food system. The situation will also be complicated by the abolition of the Second Grade milk since January 1, 2020, which is provided by the new DSTU "3662: 2018" Raw cow's milk. Specifications". This implies that processing companies will not receive about 1 million tons of second-grade milk. Dairy food producers are embarrassed as they can not compete with the UE plants in terms of prices. Recently, which was attended by Vadym Chagarovsky, the Chairman of the Board of Directors of the Dairy Enterprises Union spoke at the Forum Dairy Business 2019 held in Kyiv. The expert claimed that it is necessary to work out a special development strategy for the period until 2025 in order to save the industry. The document will provide for a change in marketing strategies and, in particular, the definition of target export markets. Currently, Ukraine has implemented a system of food safety and quality control focused on the ultimate result. That is, individual product samples are selected for analysis by the controller. In case of positive results, the good quality of products is confirmed and the whole batch is subject to sale [1]. However, this approach does not guarantee complete safety and absolute product quality. 19 million tons of milk were produced by Ukrainian enterprises and about 5 tons were produced by the population20 years ago. According to these indicators, we were among the top ten world milk producers and, despite the problems with its quality, milk was suitable for processing. Therefore, development of dairy farming in Ukraine requires, above all, operating with real numbers. This is the only way the government can see the real state of this sector. And, by the way, the biggest error is in the amount of milk supplied by the population. The identification of cattle kept in small private farms could settle this problem and provide tracking real numbers and exercising effective control. Thus, the main problems of the milk market in Ukraine are insufficient milk supply and, above all, its low competitiveness and quality. According to some experts, the competitiveness of milk depends on its quality by 80%. At present, raw milk producers are not responsible for the microbiological and hygienic indicators of the EU countries. Since 2004, the quality of milk supplied to processing plants in Ukraine is regulated by the requirements of DSTU 3662-97 "whole cow's milk". Procurement requirements. In 2007, this standard was changed and a additional Extra grade was introduced. In the EU, the main document which sets requirements for food quality and safety is the Regulation (EU) № 853/2004 of the European Parliament and of the Council of 29 April 2004 defining specific rules for the hygiene of foodstuffs. The growing demands on dairy products quality has been an important trend in milk production: in July 2018 DSTU 3662: 2015 "Raw cow's milk. Specifications" was adopted. According to the document, there are three types of milk on the market: "extra", "higher" and "first". However, it was decided afterwards to leave the "second" grade until early 2020 to give farmers time to modernize production [6]. Over the next two years, it will be approved for processing into animal feed, casein, etc. Milk price has not only to reimburse the costs of its production, but to stimulate the growth of its production and contribute to increasing the profitability of its production as well. In addition, raw milk prices include the costs of milk processing enterprises, which cannot increase the price for milk and dairy products due to low solvency of consumers. More than that, the price increase may lead to a reduction in consumption. Increasing the competitiveness of raw milk producers is an important direction in the development of dairy industry enterprises in Ukraine. To achieve this aim they need to develop a set of measures aimed at increasing the productivity of cows, gradual increasing the livestock, especially in agricultural enterprises, increasing milk production and improving its quality characteristics through highly efficient technologies on an innovative basis, taking into account world experience. For this purpose the following steps must be taken: to restore and reconstruct the existing large livestock farms and complexes; increase the efficiency of selection work; to improve the conditions of the animals farming, milking and raw milk cooling system; set up modern large dairy complexes with highly productive animals and a well-established system of raw milk quality assurance; to consolidate raw milk producers with milk processing enterprises which will contribute to pricing policy regulation; to provide effective state support for producers; to introduce resource saving technologies into production in order to reduce resource costs and improve milk quality; to create a new technical and technological base that will meet the modern requirements for milk production; to learn from the experience of other countries; to improve the quality of milk by combating counterfeiting. Thus, the сurrent problems of raw milk producers competitiveness increase are challenging and relevant, and government measures aimed to meet high standards of dairy products safety and quality are the rule for the world's leading producers.