The lower purchasing milk prices, the higher price of cooperative

“We have been compared to kolkhoz. Rumour had it we would take peasants’ properties away from them,” says Anatoliy Suprunov, team leader of the EU-funded project, “Insufficient development of dairy farming and low efficiency of agricultural markets.” “This kind of reaction is understandable, because we have entered a market where dealers earn money by bying the milk from peasants and selling it to the factories, and we are competitors for them.” The project, implemented in Pyatykhatky, in the Dnipropetrovsk oblast, provides for the establishment of cooperative, thereby solving one of the most significant problems facing Ukrainian dairy farmers – low purchasing prices for milk.

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photo-stanislavske.tv

In late February of this year, peasants in the Bershadskyi district of Vinnytsia oblast blocked several roads, demanding an increase in the cost price of milk. The sale of milk is often the only way for peasants to earn money. This problem is frequently raised by peasants, and politicians often speculate on the problem. An obvious solution is to establish cooperatives, and the EU provides financial support to several projects addressing this issue.

A number of factors affect cost prices, but one of the most significant is the monopoly of milk dealers. They are intermediaries between peasants  – who sell the raw milk and dairy producers, and they profit from the difference between the price of the dairy plant pays to the dealers and what the dealers pay to the peasants. Agreements between dealers and peasants  are usually based on an honour system.

“The milk procurement market is blatantly illegal,” emphasises Natalia Gyzhko. She is the coordinator of the EU-funded project aimed at establishing milk cooperative and improve the dairy market in Tomashpil district in Vinnytsya region. “Dealers and dairy plants may have agreements, but farmers are legally unprotected. A dealer today can pay a farmer for milk for a week or two and then stop paying for a month while still collecting milk, or speculate on fat content or other aspects of milk quality.”

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Number of workshops for the peasants were condacted by EU-funded projects to rise awareness about cooperative. Photo – http://www.tommilk.com

The average price of a litre of milk sold by peasants in Tomashpil district of Vinnytsya oblast is 3.6-3.8 hryvnyas and, as is usual, is expected to fall slightly during the summer. The EU-funded project will create a cooperative that will not only collect milk from its members, but also process and sell it under the ordering agreements of its participants. The goal is to provide legal protection to farmers and promote positive competition among dealers. The project is most active in working with four rural councils, but other dairy peasants can also join the cooperative.

“We will have a mini plant to process milk and produce up to five types of dairy products. We will create the pre-conditions to develop the dairy industry in Tomashpil district. Milk, produced by members of the cooperative, will be processed to final products and sold on-site or in other districts, “ says Gyzhko. “This mini plant will process up to three tons of milk per shift.”

This spring the Tomashpil project also worked on improving fodder for cows. In March and April, the team conducted spring field work to improve 100 hectares of public pastures in the villages of Anonivka, Pen’kivka, Pylypy-Borivski, and Rozhnyativka in the Tomashpil district. The contracting organisation prepared the soil, sowed grass, and fertilised it.

Meanwhile, a cooperative is currently being established in Pyatykhatky, in the Dnipropetrovks region. This cooperative is expected to start its work in June. This cooperative will focus primarily on replacing dealers and delivering milk produced by member farms directly to dairy plants. However, the cooperative plans to process milk itself in the future.

“We bought three milk tankers and are going to buy a fourth. We are finalising the construction of refrigeration facilities and laboratories,” says Anatoliy Suprunov. “We also plan to provide members of the cooperative with veterinary services. We want high quality  products. We want to provide our milk collection services much better than present dealers.”

Promo video aimed to encourage the peasants to develope milk production

A typical  price of milk bought from peasants in Pyatykhatky district is 3.3 hryvnyas. Milk quality also affects the cost price. Control over the animals and proper care for the animals are needed to ensure high quality products. Cooperatives provide these services, meaning a strong advantage for the members.

“Dairy plants purchase milk from big farms at a higher price,” says Gyzhko. “Because at large farms workers are more interested in the quality of their milk, the dairy plant will pay more for the quality guarantee. As for milk produced by peasants, dairy plants deem it is of lower quality. There are different people selling milk and there is no opportunity to check them all. To get the cost price of milk as high as peasants want it, they need to guarantee quality.”

Gyzhko stresses that the matter of quality will become even more important as Ukraine integrates into the EU market. “There are high demands in the EU, but milk producers can get higher a price there,”  she says.  “Dairy plants will be forced to raise the quality of their products, so they will need quality raw product. Those who are able to provide this quality now will get a higher price and become important partners.”

“The EU developed high standards for a reason,” says Suprunov. “Everything is for the customers. If you get quality raw materials, you get a quality final product to feed people.”

Background information

The EU-funded project “Development of possibilities of the cooperative for protection of legal and economic interests of private peasant farms as well as broadening of dairy product assortment to meet the demands of the social sphere of Tomashpil district” is being implemented within the EU, “Support to Ukraine’s Regional Development Policy” programme. The project budget is €477,000 with the EU contributing of over 89% of the total cost; the remaining funding comes from the local budget. The project aims to increase awareness among small farmers about their rights and opportunities to protect their legal and economic interests. It will also promote self-employment in rural areas and the availability of a wider assortment of quality dairy products at reasonable prices for pre-schools, schools, and other facilities in the area.

More information: www.tommilk.com

The EU-funded project “Insufficient development of dairy farming and low efficiency of agricultural markets” is also being implemented within the EU “Support to Ukraine’s Regional Development Policy” programme. Its budget is €199,000, of which the EU has contributed €179,000. The project is aimed at developing the dairy farming industry, establishing an efficient market for agricultural products through the creation of an organised milk market, and raising the cost price of milk by 30% for members of the cooperative. The project also expects to increase the number of cows owned by private peasants by 28% over three years as a result of the increase in the profitability of milk production.

More information: http://bit.ly/1VneQ1R