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BRDO: 88% of provisions of the Law On Milk are defective and prevent the market development

Ukraine ranks 9th in the world in terms of milk production, which is more than a third of gross livestock production. In 2017, the country produced 10.3 million tons of milk, which is 2.5 times less than production volumes in France (24.6 million tons) and 3 times less than in Germany (32 million tons). Today, the capacity of the market of raw milk, which comes to Ukrainian processing enterprises, is 26 billion hryvnias.

At the same time, in Ukraine, the dairy cattle number has decreased by 17% in the last 5 years, and the milk market loses up to 2-3% of production annually. 73% of the total production are privately owned farms and only 27% are agricultural enterprises. However, the dairy industry has significant potential for development and productivity growth.

The government, business and public representatives discussed the ways of solving the market problems during the Roundtable “Milk Market Regulation” in Kyiv on September 25. The event was organized by the BRDO Office with the support of EU4Business/FORBIZ as part of the Public Dialogue #PRODialogue.

“Changes in the milk market are really needed, so we initiated the development of the Draft Order, which should improve the quality of milk. We are interested in quality products; the demand for them is growing, so we provide state support to those farms that are ready for high standards of work and cooperation,” the Deputy Minister of Agricultural Policy and Food Olena Kovaleva said, when opening the event.

BRDO experts conducted a systematic analysis of the regulatory framework and found out that 16 of 57 regulatory acts in the milk production market were irrelevant and 5 regulatory acts were illegal. Most of 17 regulatory instruments have high corruption risks due to undefined and non-transparent procedures.

“The Law On Milk and Dairy Products contains a lot of collisions, and 88% of its provisions are defective and this creates additional barriers for the market and business development. In such a way, we have a huge “gray” area, complicated rules for identifying animals, and problems with the milk quality and safety. The procedures should be simple and clear,” the Agriculture Sector Head at BRDO Andriy Zablotskyi said.

So, for example, the main instrument on the market, which is a cattle certificate introduced to identify animals as well as register and control the milk production, currently contains no clear conditions to calculate the cost of services and no clear implementation procedure while not being a fully valid document confirming the ownership of animals without introducing amendments to the Civil Code.

The Head of the State Food Safety and Consumer Protection Service Volodymyr Lapa agrees that this instrument is inadequate, “The procedure is overloaded, and this is one of the reasons for the existing gray market. We are currently working to improve the animal identification system to make it simple and operating in an electronic format”.

Other instruments aimed at ensuring the traceability of milk production also do not work. Moreover, there is no legal mechanism to regulate ‘producer – intermediary – processor’ relations. As a result, 57% of milk production from privately owned farms is beyond the state control of safety and quality of products.

In accordance with the EU Regulation 1308/2013 establishing a common organisation of the markets in agricultural products, the European practice regulates relations between producers and intermediaries/processors on a clear basis, in particular:

* contracts/written offers precede the delivery of products;

* fixing a solid price or a formula for calculating the price of milk;

* payment terms and conditions;

* the way milk is delivered/collected.

The was also attended by Mykola Moroz, Deputy Director of the Food Safety and Quality Directorate at the Ministry of Agrarian Policy, Serhiy Shupyk, Director of the Agro-Industry Department of the Kyiv Regional State Administration, Andriy Dykun, Chairman of the NGO “All-Ukrainian Agrarian Council”, Vadym Chagarovsky, Chairman of the Board of the Ukrainian Union of Dairy Enterprises, EBA and ACC, business and expert community representatives.

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