Impact of crisis factors on the profitability of dairy industry in Ukraine

Abstract

The special contribution of this research lies in the thorough examination of the Ukrainian dairy industry's response to crisis factors, with a particular emphasis on unprecedented challenges brought about by the Russian invasion in 2022, offering a comprehensive analysis of previously unexplored long-term implications for the sector's profitability. The authors of the study highlight that the Ukrainian dairy industry demonstrated exceptional resilience and growth until the beginning of the war in February 2022 with a help of proactive state support and innovative agricultural methods. However, the Russian invasion posed unprecedented challenges that disrupted traditional trade channels, economic connections, and significantly limited the dairy sector's access to critical resources. In addition to security risks, the conflict in Ukraine resulted in supply chain disruptions, electricity shortages, rising inflation, trade restrictions, and hindered the country's capacity to attract foreign investments, all of which significantly worsened the economic situation in the country. The authors identify crisis factors contributing to the decline in dairy farm profitability, including reduced milk production, limited export opportunities, increased production costs, a shrinking domestic consumer base, higher imports of dairy products, losses in occupied territories, and insufficient financial support during the conflict. It is noted that strategies such as export diversification, stimulating domestic demand through reduced VAT and enhanced resilience, are of paramount importance in overcoming these crisis-inducing factors. The authors emphasize that collaborative efforts among stakeholders, alignment with international initiatives and sustainable development goals, as well as proactive implementation of comprehensive strategies, are critical steps toward addressing the current crisis and shaping a sustainable future for the Ukrainian dairy industry.