The Determinants of Dairy Farming Competitiveness in Ukraine

WTO accession and the expected free trade agreement with the EU pose significant challenges for Ukrainian agriculture, implying structural changes for the sector as well as adaptations at the farm level to improve efficiency and competitiveness. However, a recent study by von Cramon-Taubadel and Nivievskyi [2] demonstrates a clear lack of competitiveness. This directs attention to the forces that drive competitiveness in Ukrainian agriculture. Dairy farming deserves particular attention in this regard, since it is one of the main income generating sources for the rural population, and of raw material supply for the fast growing dairy processing. In this paper at first we analyze the profile of competitiveness of dairy farming in Ukraine, demonstrating that only about 20% of dairy farms produce at competitive level. Then using a fixed-effect panel regression we analyze the determinants of competitiveness in Ukrainian dairy farming. The size of the farm, productivity and labor intensity have a strong positive effect on competitiveness, while arable land per head has negative effect. Finally, total subsidies received by farms are found to have a negative impact on competitiveness, and this impact does not differ significantly between farms with different herd size.