Dairy associations insist on observing principles of free trade between Ukraine and Poland
KYIV. June 19 (Interfax-Ukraine) – The Union of Dairy Enterprises of Ukraine and the Polish association Izba Mleka call on their governments to actively resolve the problems of the dairy sector in the two countries, which arose due to political turmoil in the spring of 2023 while respecting the principles of free trade.
"We want to express our concern about what is happening in the dairy sector right now. We, as an industry, want to ensure that our consumers have the continued activity of our companies and our farms. We do not want small groups that are not associated with the dairy sector to complicate our relationship," Agnieszka Maliszewska, director of Izba Mleka, said on Friday during the first Ukrainian-Polish Dairy Dialogue, which took place at Interfax-Ukraine.
Executive Director of the Union of Dairy Enterprises of Ukraine Arsen Didur recalled that the European Union has canceled all customs duties and quotas for Ukrainian products for one year since June 2022, which brought mutual benefit to the economies of Poland and Ukraine, and the dairy sector in particular, so this regime was extended for another year.
The director of the Union expressed regret that since April 2023, "some incomprehensible actions began to occur in relations between Ukraine and Poland."
"These events did not benefit our fraternal relations and trade relations as well," he said.
Didur said that representatives of the Polish and Ukrainian dairy sectors do not intend to remain indifferent to what is happening and have developed a single agreed position, insisting that any unlawful interference in the business does not benefit either side.
"Despite the fact that Poland has a stronger position in mutual trade in dairy products, the Union of Dairy Enterprises of Ukraine is categorically against the interference of the governments of the two states and the creation of problems in free trade. We accept neither a ban on the supply of Ukrainian milk to Poland nor the creation of any additional veterinary control from the Ukrainian side. All actions of governments should be based on the principles of democracy, free trade, and the rule of law," the head of the Union said.
Industry associations of Poland and Ukraine invited leading experts from the two countries to dialogue to publish the results of the two countries' trade in dairy products during 2022-2023 and show the groundlessness of any restrictions on trade between the two countries.
Food & Agri Sector Senior Analyst at F&A Hub BNP Paribas Bank Paweł Wyrzykowski said that before the full-scale Russian invasion of Ukraine in 2021, Ukraine was the third largest market for Polish dairy products with a 5% share after Germany (19%) and the Czech Republic (7%). In particular, 10.5% of all exports of Polish cheeses and cottage cheese, 5.3% of yogurts, and 3.4% of butter were sent to Ukraine.
According to the Polish expert, in 2022 the share of exports of dairy products from Poland to Ukraine decreased to 3.3%. However, the Ukrainian market still remains a very important export vector for Poland for dairy products outside the European market.
In monetary terms, the export of dairy products from Poland to Ukraine in 2022 decreased by 13% compared to the pre-war 2021, to EUR 108 million. In 2022, Poland reduced the supply of whey to Ukraine by 32%, cheese by 31%, milk and sour cream by 28%, and at the same time, the yogurts supply grew by 3%.
At the same time, according to the results of the first four months of 2023, an upward trend was observed, and the export of Polish dairy products to Ukraine increased, Wyrzykowski said.
He said Poland is the largest European supplier of dairy products to Ukraine with a 50% presence. In particular, in the structure of European supplies, the share of Polish products in Ukraine reaches 79% for milk and sour cream, 79% for yogurt, 72% for cheese, 51% for cottage cheese, 44% for dry whey, and 15% for butter.
The expert does not consider a 67% decrease in the trade balance in 2022 a problem, which fell to EUR 43 million compared to EUR 121 million in 2021, since in 2020 this figure was EUR 42 million, and the minimum level of EUR 6 million was recorded in 2015.
According to him, such fluctuations were observed during Poland's accession to the EU, when specialists from Germany and Poland could not predict the consequences of opening markets, but the markets reacted adequately, and the situation leveled off within a few years.
Expert of the Institute of Agrarian Economics Leonid Tulush thanked the representatives of Polish dairy products for giving Ukraine the opportunity to sell the surplus of dairy products Ukraine had due to the outflow of main consumers, in particular, to Poland.
"From the beginning of 2023, in the first five months, the situation in the Ukrainian-Polish trade balance in dairy products has changed dramatically. In the first quarter, imports of Polish dairy products to Ukraine five times exceeded the corresponding indicator of exports of Ukrainian dairy products to Poland. In the first five months of the year, the ratio increased 7.4-fold," he said.
Tulush recalled that in April 2023, Ukrainian dairy products were not supplied to Poland at all. In May, products were delivered 50% less than in March this year. At the same time, Polish products enter Ukraine steadily, and deliveries in monetary terms exceed EUR 9.5 million monthly.
"If we talk about the balance when it comes to certain types of dairy products, then a positive balance for Ukraine is observed only for milk powder and butter. For all other positions, the volume of Polish imports significantly exceeds the Ukrainian exports volumes," the Ukrainian expert said.
Speaking about the importance of Polish imports for the Ukrainian dairy sector, Tulush said that if Poland's share of the dairy products import to Ukraine exceeds 45%, then the export of dairy products from Ukraine to the Polish market is only 8%.
Comparing the export-import structure, he said that Ukraine supplies mainly milk powder, butter, and whey powder to Poland. The share of milk powder is 75%. If we talk about the structure of imports of Polish dairy products to Ukraine, then, according to him, cheeses of various types prevail with a share of 75%, and sour-milk products and whey account for 10% each.
"This indicates the incompatibility of the volume of mutual trade between the countries. Ukrainian dairy products are not a threat to the Polish dairy market," the Ukrainian expert said.
Director of Lustdorf LLC Oleksandr Samokhvalov pointed to the reduction of the domestic milk market in Ukraine due to the main consumers – women and children – have left the country and noted the importance of exports to save the work of milk processing enterprises. According to him, there is a constructive cooperation between Ukrainian and Polish dairy producers.
Lustdorf, in particular, was able to work in 2022 only due to the increase in milk powder exports to the EU. Due to the loss of opportunities to export products by sea, the company is forced to transport products through the EU, in particular, Poland. However, recently it has been idle at the border for two to three or more weeks, Samokhvalov said.
Maliszewska said that the two sides are fixing the same problems on both sides of the border, in particular, with logistics. She called on the veterinary and customs services to resolve them as soon as possible.
"The best solution to problems is mutual dialogue, not protests. Especially the protests of those groups that do not represent the interests of our sector, but adapt to them. It is important for us that those groups that create problems for us do not point out to Polish or the Ukrainian government how to act," she said.
As a result of the first Ukrainian-Polish Dairy Dialogue, both associations will send a joint statement to the governments of Poland and Ukraine with proposals to resolve the current situation.