Foreign trade of Ukraine and its influence on the world dairy market
Despite economic disturbances in cattle breeding and processing dairy industry of the state after the collapse of the Soviet Union, Ukraine is still among world leaders by milk production. It is true that mass curtailment of cattle stock has promoted decrease in milk production in Ukraine by 7 times if compared with indices during the USSR times. Meanwhile at present Ukraine still holds the fifth place in Europe by milk yield and is included into the top ten world milk producers. Though production has diminished inside the country, we still have rather big milk excess. Milk that can't be consumed by local market is quite successfully exported from Ukraine as a whole number of dairy products. In particular, approximately 27% of the total yield in terms of money was exported in 2003. Almost USD 300 mn were earned from export of dairy products (casein included) last year. These are pretty good figures. It should be noted that in general export of agroindustrial commodity group (groups 1-24 of Commodity Classification of foreign economic activity) made USD 2,732 mn last year. At the same time, the share of the 4th group in export pattern constituted 9.2% (without casein). The share of dairy products in export of agricultural products and foodstuffs this year is even more substantial. In January-September 2004 the share of the 4th group made 14% of the total export of 1-24 commodity groups. Only grain and oleaginous crops exceed export figures of dairy products among all agroindustrial commodities. All this information proves that the role of dairy products in Ukraine is enormous. A clear tendency of currency earnings augmentation from export of these goods can be traced in Ukraine (see Picture 1). Tentatively export of dairy products from Ukraine in 2004 would outrun USD 500 mn and will by nearly 30% exceed the record export figure of 2001. If compared with unsuccessful 2002, export of these commodities would be 2.5 times higher. Therefore Ukraine has beaten all its records in terms of export and probably would further expand delivery volumes, provided present favorable situation be retained on the world market.
Due to a number of factors mainly butter, milk powder, casein and tinned milk were exported in nineties from Ukraine in the period of dairy products export formation. Cheese has been added to this list in the few last years. It has not be just added but obtained the lion's share in export pattern both in terms of quantity and value (see Picture 2). According to preliminary forecasts, export of cheese would occupy approximately 36% of the general export in terms of value in 2004. The share of skimmed milk powder would constitute about 20%, casein -19%, butter - 13%, whole milk powder - 6%, and tinned milk - 4%.
Back from Soviet times Ukraine supplied enormous volumes of dairy products to Russia. In nineties deliveries of dairy output to both this country and many other republics of the former Soviet Union have significantly curtailed. Ukrainian exporters gradually mastered foreign sales markets and sold milk powder and casein there. Butter and tinned milk were exported to Russia and the CIS countries in rather big lots. Export of cheese was very insufficient at all. However, trade indices on sales of dairy products to Russia have significantly increased lately mainly due to abrupt augmentation of cheese export. At the same time, deliveries of milk powder were restored. As a result, in preliminary export estimation, the share of Russia in the general pattern of dairy products' export exceeded one half in terms of value over the first three quarters of 2004. Germany occupied the second place and Poland the third place due to significant expansion of expensive casein import. Earnings from export of dairy products to the Netherlands and China are also considerable. A lot of output, presented mainly by milk powder, was sold to untraditional for Ukraine countries Algeria and China (see Picture 3). In general, dairy output was delivered to 73 countries of the world over the first nine months of 2004.
Market of cheese gets very dynamic in Ukraine. It seems like Ukrainian producers would manufacture the same amount of cheese as it was in the best years of the Soviet Union. Ukrainian cheese makers have made a breakthrough on the external sales market over the last two-three years Russian buyers provided assistance in this, because they estimated Ukrainian cheese as one of the most acceptable for the market of Russia Federation. A lot of importers consider that Ukrainian-made cheese has the optimal ratio "price/quality" for the Russian market. Besides production growth, a number of other factors essentially influenced growth of import demand, and particularly:
-quality of cheese produced in Ukraine has improved along with expansion of assortment;
-growth of cheese consumption in Russia;
- higher price competitiveness of Ukrainian cheese versus imported to Russia output from foreign countries;
- correct modern marketing policy of many Ukrainian cheese vendors.
Export of cheese has started to actively augment starting from 2000 taking into consideration all previously mentioned factors. As projected by analysts, more than 80 ths. tons of cheese would be exported from Ukraine in 2004. This figure is ten times higher than the indices of late nineties.
As we have already mentioned Russia is a main buyer of Ukrainian-made cheese. Russia holds 98-99% of cheese export in Ukrainian export pattern (see Picture 5). Ukrainian cheese output has significantly edged out production from other countries on the Russian market. If the share of Ukraine was about 30% in the pattern of Russian cheese import (without Belarus) two years ago, than this year it holds more than a half of the market. Only output from Germany, Lithuania, and Belarus (see Picture 6) can compete with Ukrainian production relatively seriously. Despite the fact that Ukraine exports its output to exclusively Russia, it occupies a worthy place in the pattern of world trade. If judging by USDA forecasts that main cheese exporting countries would deliver roughly 13 mn tons of cheese this year, then the share of Ukraine in the pattern of main exporters would constitute approximately 7%
Vasiliy VINTONYAK, Director of Agrarica LLC