Background Ukraine
Ukraine war also affects dairy industry locally
The war in Ukraine seems to have the greatest impact on grain cultivation in terms of agriculture and food supply. However, the problems do not go unnoticed by the dairy sector either. In the country itself, factories come to a standstill or have to produce less. In Russia and Belarus, dairy is indirectly affected.
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In Ukraine there are two major domestic dairy producers: Roshen and UkrProduct. The first company is a major chocolate producer with an annual turnover of €800 to €900 million. The company is owned by former President Poroshenko. One of the four factories that the group has in its own country is the dairy factory in Vinnitsa. There are no known problems there, although there is fighting in the region. Fellow company UkrProduct has three dairies in the country and an annual turnover of around €67 million. The factory in Zhitomir is currently at a standstill due to the fighting. The two other companies are at a standstill.
Lactalis is one of the three major French dairy companies active in Ukraine and probably the largest. Lactalis' three Ukrainian factories account for an annual turnover of around €100 million. The factory in the port city of Nikolaev was briefly halted last week due to the fighting, but it said it has resumed production. The factory, like one of the other two, is operating with a smaller production, partly because the milk supply is difficult due to the fighting in the country.
Restarting factories
Danone has two factories in the country and has shut down one of the two due to the war. Dairy company Savencia has a factory in Zvenigorodka, south of the capital Kiev. He reportedly has no problems yet. The Swiss Nestlé first announced that it would shut down all factories in the country, but has now resumed activities.
Danone and Nestlé also have factories in Russia but are hesitant to remain there after the imposition of a series of Western sanctions. Fonterra has already made the decision. Not about a factory, but about stopping dairy supplies to the 'aggressor country'.
German dairy companies
Major foreign dairy interests are in three German dairy companies: DMK, Ehrmann and Hochland. Until a few months ago, FrieslandCampina was also active there, but this company sold the factory in Stupino and the other activities in Russia to Ehrmann.
The Russian dairy says it does not expect any major problems from all Western measures against the country, because it would be largely self-sufficient. That is not entirely true, because an important part of the milk supply comes from neighboring Belarus, which is closely connected to Russia. According to the Russian Dairy Association, 30% of Russian dairy imports come from Belarus.
Concentrates can become a problem
The dairy sector in Russia and Belarus says it is not afraid of production declines, but concentrate producers do not dare to say this so loudly. Due to overloading of the railways to and from Siberia and the Far East (due to the relocation of war equipment), it is currently barely possible to import Chinese animal feed additives. The supply of concentrated feed from the West is also in danger of stagnating.
US dairy farmers fear for margins
The dairy farming and dairy industries in New Zealand and Europe do not appear to be concerned about the commercial consequences of the war in Ukraine for the time being. Many sales prices will continue to rise. In the United States, dairy farmers are afraid of higher production costs. Dairy farmers there are currently doing well, with a milk price of more than €40 per 100 kilos, but they fear sharply rising production costs. This is because large-scale livestock farming there is less grass-based and requires a lot of feed.