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Abstract of the Master's Qualification Work

"Research of Ukrainian Dairy Market"

The purpose of master's workis to investigate the status of milk and dairy products in Ukraine.

The objectives of the work are:

1) analyze the dynamics of production, consumption, processing of milk and dairy products in Ukraine

2) identify specific domestic of dairy industry

3) identify major problems of the dairy market

4) search for solutions to improve the dairy industry of Ukraine

Relevance of the work. Need to solve problems of the dairy industry to ensure its effective operation to meet the objectives of producers, processors, consumers, and enhance the competitiveness of both domestic and foreign markets makes it necessary to conduct research in this area. Issues of assessment, operation and development of the dairy industry are reflected in the works of local scientists as V.M. Bondarenko, M.M. Ilchuk, M.P. Korzhinsky, L.V. Protasov, P.T. Sablukov, I.N. Topiha, G.V. Chaban, V.P. Chagarovsky etc.

Scientific novelty of the received results. Analysis of statistical information of production volumes of certain types of dairy products, the volume of milk supplied to processing, has revealed one of the problems in the industry — the falsification of dairy products (replacing milk fat by vegetable fat).

Practical value of the received results. Awareness of general and specific features of market milk and dairy products will allow the various market participants to efficiently build the program of function.

Summary of the basic material. Dairy industry occupies an important place in the economy of any state and the provision of food essentials. Dairy products are essential for ensuring public health. Product created by nature, incorporates almost everything the body needs. The milk system includes production, harvesting, processing and sale of dairy products. Dairy industry includes the production of such groups: butter, cheese, milk products (pasteurized milk, cream, dairy products, etc.) and milkcanning production.

The main factors that determine the geographical location of dairy enterprises sector, their effective functioning and development are the availability of raw materials and market of finished sales [2, p.263].

Productions of milk and dairy products have its own specific economic and organizational characteristics [3; p.357]:

1) short shelf life of products in raw form;

2) there is a wide range of products;

3) the need for cooperation and integration, due to the peculiarities of processing of milk.

In the formation of a complete cycle of production of raw milk to the receipt of finished products to consumers, agriculture is in a difficult position, primarily because of the high fragmentation of production. In most cases, the demand for end-products is more elastic, in contrast to the demand for raw milk. Processors and buyers, have little power in the food market, especially in the formation of pricing policies. Milk producers also have to agree with these terms, which is associated with features of raw milk.

So we can talk about the market of dairy products in fresh and processed form [3, p. 359].

Segments of the market milk and dairy products are [4; p.109]:

1) market of consumers — individuals who buy fresh and processed products to meet individual needs;

2) market of producers — buyers of fresh produce as raw materials for processing or finished products and semi-finished products for use in the production process in catering establishments, the food industry for the manufacture of other food products (confectionery and bakery products);

3) market of resellers — the buyers of products with a view to subsequent resale (mostly institutions wholesale and retail trade);

4) market of government institutions — government agencies that purchase products for the transmission of medical facilities, orphanages, military units, etc.;

5) foreign market.

Analysis of statistical information allows us to conclude that, since 1990 the market of milk and dairy products in Ukraine are characterized by a negative trend: the shrinking herd of cows and in milk production, higher prices and lower consumption of dairy products among the population (Table 1).

Table 1 — Production, resources and sales of milk in Ukraine (1900-2009 years) [5]

We can say that at the moment the industry is in a state of stagnation. Among the major factors hindering the development of the domestic market of milk and dairy products are reduction in the number of cows, low milk raw quality, obsolete technology, non-conformity of national standards and quality requirements of milk in Europe [6; p. 229].

Volumes of milk production in Ukraine from 1990 to 2009 years decreased by more than half (from 24.5 million tons in 1990 year to 11,6 million tons in 2009 year). The main factor for this trend is the reduction of milk production in agricultural enterprises: with 18.6 million tons in 1990 year to 2.1 million tons in 2009 year (or 87%). As a consequence, the major milk producers became household (their share in 2009 accounted for approximately 82%, and in 1990 76% of milk producing by agricultural enterprises (fig. 1).

Figure 1 — Production of milk in Ukraine, thousand tons [5]

Livestock of cows from 1990 to 2009 years in all categories of farms dropped from 8,378 thousand heads to 2,758 thousand heads (or 67%). These changes were due to large agricultural enterprises, where the number of livestock during this period decreased from 6,191 thousand to 605 thousand heads (or 90.23%). In the household of the same population the number of cows in this period declined from 2,187 to 2,153 thousand head (or 1,5%), as compared to 2008 grew by almost 5% (fig. 2).

Figure 2 — Livestock of cows in Ukraine, thousand heads [5]

In 2008 year 7,7 thousand enterprises that contain dairy cows: 27,3% had from 1 to 20 cows, 32,5% — from 20 to 100 cows, 36.5% — from 100 to 500 cows, 3 , 7% — had 500 or more cows, of which 31 companies have 1 000 or more cows [7, p.61-64]. This situation has a negative impact on the profitability of dairy farming as well as dairy herd of 50-100 cows is economically inefficient [8].

An important issue of dairy industry is the poor quality of raw milk. The share of milk sold by agricultural enterprises (which in most meets the first and second milk grade) to processing enterprises in 2009 year amounted to 33%. Remaining the 67% of milk comes from household, which can not ensure high quality. But the quality of milk, implemented to enterprises, tends to increase. This is due to the desire to achieve higher revenues, as the price difference between I and II grade — within 10-20%, [8].

From 2003 to 2010 years, the largest increase in production of dairy products is observed among the spreads (an increase of 55%), milk treated (an increase of 25%) of cheese, and fresh unfermented and fermented cheeses (an increase of 24% and 36% respectively) (Table 2).

Table 2 — Production of main dairy products in Ukraine (2003-2010.), thousand tons [5]

Analysis of statistical information of production volumes of certain types of dairy products and the volume of milk received for processing [7], has revealed the falsification of dairy products.

Table. 3 shows data for the production of certain types of dairy products. Based on these data was calculated the volume of milk, which is required for the production of a dairy product according to its fat content.

Comparing the results of the required amount of milk needed for the production of a product and official statistical data on the volume of milk processing, we can note that the volume of milk to be processed exceeds the value of formal (actual) processing volumes. On this basis, we can conclude that on average about 40% of milk fat is replaced by the vegetabl fat (for the period 2003-2009 years.). In this case, the main change occurs in the milk fat foods with the highest fat (cheese and butter).

Table 3 — Analysis of production of main dairy products in Ukraine (2003-2010.), thousand tons [5]

From 1990 year consumption of milk and dairy products has decreased by almost 60%. If in 1990 year one man ate 373 kg/year of dairy products (recalculated as milk), in 1995 year consumption has amounted to 244 kg/year and in 2009 year — 213 kg/year (fig. 3). With scientifically based standards people should consume 380 kg of milk per year. For comparison: the average annual consumption of this product in France — 440 kg, in Germany — 430 kg, in Denmark — 380 kg, Austria — 370 kg [8].

Figure 3 — Consumption of milk and dairy products in Ukraine, thousand tons(recalculated in milk) [5]

Pricing for milk and dairy products is characterized by seasonality, peak reduction of prices in Ukraine notes in June — August. Starting from September, due to a decrease in milk production, prices rise and reach its peak in November — December. Great influence in pricing at the market of finished dairy products have intermediaries in the baying of raw milk-and realization of finished products (price can increases by approximately 15-20% [7, p.61-64]). After adoption of the Law of Ukraine [9], the producers of milk and meat have ceased to receive the VAT from the refiners as a result milk producers raised their selling prices by more than 40% to offset losses from VAT [10, p. 22].

In 2009 year Ukraine took eleventh place among the world's major producers of milk and dairy products (production volume in 2009 year totaled 12 million tons). World's leading producer of milk in 2009 were India (112 million tons), USA (85.5 million tons), China (43.6 million tons), Russia (32.8 million tons). In 2009 year, 163.75 tons of milk was exported in the form of cheese (47%), powder milk products (28%) and other goods. Experts estimate that if milk production in Ukraine decreased by 10%, the country from an exporter will become a net-importer of dairy products [8].

In the structure of exports nearly 50% are in the market of Russia (Ukraine exports cheese in this country). Powder milk products are mainly exported to Syria, Turkey, Algeria, Kazakhstan, Egypt.

In 2009 year imports of milk products in Ukraine amounted 46.16 thousand tons. Also in 2009 year in Ukraine from Belarus was imported a record volume of butter (16.3 thousand tons), that the structure of imports (in kind) was 35%.

In 2009 year in Ukraine 11 major milk companies held 60.2% market share, accounting for the remaining approximately 300 producers held 60.2% milk market share (fig. 4).

Figure 4 — Structure of the dairy market (ву manufacturers) in 2009 year, % [11, p.64]

It should be noted that in the future we can predict a tendency of reduce the number of enterprises, and tighter competition in the market. Ukraine's accession to the WTO has paved the way for foreign producers. Large companies with foreign capital are constantly increasing their market share controlled by absorbing competitors. For example, Frenchgroup “Lactalis” (TM “President”) already owns a Nikolaevskij dairy plant , company “Bіlosvіt-Uman” and Pavlogradskij dairy plant (TM “Fanny”) [8].

Conclusions:

In general we can say that the basic steps for the removal of the dairy industry of Ukraine from the crisis are [18]:

1) the development of regional programs of development of dairy farming;

2) settlement of the situation with VAT refund;

3) the development of integration ties between farmers, agricultural enterprises and dairy establishments;

4) revision of statistical methods of data collection and processing of information regarding production and processing of milk;

6) the creation at the state level system of price monitoring and information regarding the conditions and status of milk and dairy products;

7) financial support to enterprises through the cheapening of short-and long-term loans and leasing operations for the modernization and reconstruction;

8) competition among producers.

Bibliography:

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7. Бондаренко В.М. Розвиток ефективного виробництва молока та його промислової переробки в Україні / В.М. Бондаренко // Економіка АПК. — 2008. — № 5. — с. 61-64.

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9. Про внесення змін до деяких законів України щодо підтримки агропромислового комплексу в умовах світової фінансової кризи: Закон України: [від 22.12.2009 р. №1782-17].

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12. Чагаровский В. Изменения в молочной отрасли. Возможные пути минимизации влияния экономического кризиса [Электронный ресурс] /Режим доступа: http://www.ifc.org/ifcext/uspp.nsf/AttachmentsByTitle/Presentation_Chagarovskiy_rus/$FILE/Chagarovskiy_Rus.pdf.

Note

When was writing this abstract, the master’s qualification work is not completed. Date of final completion of work: December, 2010. Full text of the work and materials on a work theme can be received from the author or her scientific supervisor after that date.