Rivers of Milk, Islands of Prosperity

Co-ops offer hard-pressed Ukrainian dairy farmers many benefits, although the idea has been slow to take hold.

A villager always wears many hats. Farming helps him to survive, even if he has to sell the products at below-market prices. To live – if not in wealth, then well enough, receiving a fair price for his products – the Ukrainian dairy farmer needs to have more than a farm with one or two cows.

For one farming community in eastern Ukraine, the dairy cooperative – common in much of Europe but a relatively new idea here – has brought not only the opportunity to sell milk at a higher price but has helped drive improvements in many aspects of rural life.

The initial agricultural cooperatives in the Dnipropetrovsk region had rocky starts. The first was established in the village of Aleksandrovka. In 2010, neighboring Andriyivka formed its farmer’s co-op, Dobrobut Andriyivka (Andriyivka Prosperity). The Aleksandrovka co-op soon lost steam, and it has conducted no economic activity for many years. Andriyivka Prosperity also ran into hard times at first. Many villagers lost faith in the group over the alleged corruption of some board members and failure to pay milk suppliers. This hurdle was overcome when villagers elected new board members in 2012, paid off the co-op’s debts with a loan and restarted the enterprise.

It all started in 2009 with a donation from the Canadian charity Heifer Project International. The gift of 20 heifers and 10 sows made a difference in this village, where only a few of the 700 or so residents had jobs and the decaying infrastructure and population outflow bore witness to poverty and decline. Heifer International set two conditions for its aid. First, adherence to its bedrock principle: if you receive a gift, pass it on to another. Thus, those villagers who received livestock handed over the grown offspring, already inseminated, to their neighbors. Soon the herd of milk cattle in the village grew to 400 animals.

The second condition was rather a recommendation: cooperate to facilitate the market for your products.

A Bargain Price on Milking Machines

“There were three of us from the very beginning, then seven activists who decided to create a cooperative,” recalls Olga Krymova, who along with a few others helped launch the modern co-op movement in the Dnipropetrovsk region. “The cooperative was successful because we received assistance from the regional budget.”

Co-op members who kept three or more cows were given the option to buy milking machines normally priced at 6,000 hryvnias for just 1,000 hryvnias (about $120 at the time). Villagers were skeptical at first, Krymova recalls. “But when the first received the machines and felt the benefits, then other housewives began to buy milking machines. The cooperative received a milk truck.”

Today the cooperative has 129 members from Andriyivka and several nearby villages. One of the first cooperatives in Ukraine, it is one of the few that are still active.

Andriyivka Prosperity’s financial situation improved thanks to a 2015 amendment to the tax code that allowed dairy co-ops to buy milk from third-party producers as well as members. Dairy farmers who wish to join pay a fee of around the equivalent of $10 and receive dividends based on annual results – from several hundred to several thousand dollars annually.

Andriyivka Prosperity buys milk in more than 20 villages in Dnipropetrovsk and the neighboring Zaporozhye and Donetsk regions, executive director Sergei Zakharenko explains. 

“These villages have 30 milk coolers with a capacity of 500 liters each. There are two more of 5,000 liters each on the territory of the cooperative. We have three milk tankers – the cooperative bought one, the second we rent, the third was bought from the village council budget. We take seven tons of milk daily. The larger the batch, the higher the price paid by the processing plants. Thus, the members of the cooperative sell their goods at a fairer price.” 

Cooled milk is supplied for processing to dairies in the Zaporozhye, Cherkasy, and Kherson regions. The cooperative provides veterinary and insemination services to its members, and runs its own laboratory where much of the work of quality control is carried out.

Ukrainian Co-ops Play Catch-up

Ukrainian dairy co-ops don’t hold the commanding market position that they do in the European Union, where co-ops controlled 55 percent of the dairy market in 2018, and some have grown to the scale of multinationals, according to a European Parliament briefing paper. In Ukraine, co-ops produce on average 20 percent of the country’s annual milk production of between nine and 11 million tons per year, although according to some experts, the figure could reach 50 percent if co-op purchases from individual farmers are included.

Antonina Kurylenko is a farmer and the current chair of Andriyivka Prosperity. She and her husband Vadim opened a farm with 10 dairy cows in 2010 with a $10,000 low-interest loan for construction and equipment from Heifer International, along with guidance from Canadian government agriculture specialists. The family also invested its own savings.

Each cow in their herd provides 6,500 liters of milk per year. They are fed from what the family grows on the five shares of land they received when the collective farms were disbanded. Thanks to better equipment, Kurylenko says, the family can run its herd under standard conditions with less effort than it once took to keep four animals under terrible conditions.

“Our family was able to cover the costs of maintaining the farm for several years and earn a living. The livestock increased to several dozen, the farm expanded, and it has already become a business. When we started, we had to figure out everything by ourselves, and the advice of our Canadian friends was helpful,” Kurylenko says. “Today, visitors come from different regions of the country. People seek experience, technologies, and advice.”

The cow has always been a breadwinner in the Ukrainian family, and enjoyed special love. A family-type farm is not just a business – it is a style of life, a philosophy, and an atmosphere of love and mutual support. 

Andriyivka Prosperity also benefits from economies of scale through its membership in the Gospodar (“Host”) association of agricultural service cooperatives. Gospodar seeks out new markets and provides equipment – harvesters, tractors, mowers, and milk coolers. The association includes six co-ops in the Dnipropetrovsk region as well as cooperatives from the Kherson, Poltava, and Donetsk regions. In all, about 900 small- and medium-sized agricultural enterprises take part.

Gospodar was established in 2012 with financial support from the Canadian government and other foreign sponsors. One of its member co-ops established the Molocharskoye demonstration farm, the first of its kind in Ukraine, a modern complex on the outskirts of Aleksandrovka. Farmers from all parts of Ukraine come here for practical training, seminars, and education in advanced animal husbandry techniques.

Andriyivka Prosperity’s continuing association with the Canadian government underscores both the benefits and the sometimes difficult decision-making process at Ukraine’s farm co-ops. When the Canadians proposed building a new processing line for the co-op by 2023 to be co-financed equally by each partner, some members leaped at the opportunity to invest profits into developing production capacity. But some small dairy farmers, owners of one or a few cows, voted against the plan. Instead, a co-op from Zagora in the western Lviv region will implement the Canadian proposal. 

The Zagora co-op began in 2011 after villagers learned about the cooperative concept during a visit to Andriyivka. It now counts about 50 members, board chairman Nikolai Pilipets says. Zagora and three other co-ops have combined their efforts with the aim of expanding into milk processing.

“We are happy for our friends and associates” in the Lviv region, Kurylenko says.

Strong Village Economies for Strong Rural Communities

Andriyivka co-op members also are active in developing projects for the local community and seeking foreign backing and investment to sustain and expand their operations.

Svetlana Spazheva, the head of the Pokrovske united territorial community, which includes Andriyivka, explains the benefits. “Cooperation with international non-governmental organizations allowed the community to equip part of the school premises for a kindergarten, to implement two energy-saving micro-projects in educational institutions, and to build a playground and a gym.”

Agricultural cooperatives and small and medium family farms are widespread in the EU. Cooperatives prevail in agriculture in Poland, Ireland, and Estonia. In contrast, the co-op movement in Ukraine is only a decade old and still in its shakedown period. Many small dairy farmers who produced less than six tons of milk per cow per year have either gone bankrupt or exist only on paper. Affordable loans are scarce and the authorities provide almost no agricultural subsidies. Only the strongest co-ops survive.

The development of the cooperative movement is connected with numerous risks and pitfalls, notes Yuriy Krivoruchko, the legal counsel for the Association of Small and Medium Business Owners of Ukraine. Current legislation allows two forms of agricultural cooperative: production co-ops and service co-ops. Neither legal form fully meets the needs of agribusiness, Krivoruchko says. An agricultural service cooperative, for one thing, does not have the right to buy products from its members. In the case of dairy co-ops, they can only collect and cool milk. 

The advantages of cooperation in the dairy business are clear in the EU, where they understand the benefits of processing products in the same place where the cows live. But if EU farmers also struggle with global, low milk prices, their less well-capitalized Ukrainian peers are much worse off.

Logistics is another hitch. It makes much more sense for a plant to pick up 10 tons of quality milk at a single collection point than to drive around small farms for milk of dubious quality, Krivoruchko says. Centralized collection of milk in the countryside will help farmers demand a higher price, he believes.

“Cooperatives have the financial resources to buy the necessary equipment to analyze milk, cool it, transport it, even to create their own processing facilities,” he says. “Individual farms, as a rule, are financially limited in their ability to take advantage of such opportunities, and they have to either settle for [being] small or unite – in cooperatives or associations.”

“The cooperative became the nucleus that brought us together and allowed us to believe in our own strength,” says Pokrovske community head Spazheva.

Still, she says, from the wave of cooperatives that began in the 2000s, only a handful are still functioning across the country. “In the Dnipropetrovsk region Andriyivka Prosperity is probably the only one left. The others either collapsed, or just keep afloat.”

Andriyivka’s achievement is all the more remarkable in light of these pitfalls, Spazheva says.

“The cooperative has halted the extinction of the village, allowing young people to stay in their homelands and have jobs and a livelihood.”

Lyudmila Maslova has worked for several publications in the Dnipropetrovsk region since 1986. For the past six years she has been the director and editor in chief of the newspaper Pershotravenskie novosti.

Translated by Helen Pilchenko.