Law on reduction of VAT rate, unnecessary for the dairy market, entered into force

The law on reducing the VAT rate was signed at the end of February, which means a new level of this tax (14%) when collecting milk from agricultural enterprises from March 1. – PioneerProduct

As expected, after the signing of the law, an “orgy” began on the market: factories that did not have time to re-sign the protocols without VAT are now hastily explaining to manufacturers the need to revise the final prices. Farmers, seeing an opportunity to earn extra money, traditionally say that “everything is lost”, despite the fact that if the level without VAT is maintained, the tax burden for them is reduced.

The situation is still unpredictable. As a result, the price of milk without VAT can either remain the same (if all participants agree on a price reduction with VAT by 6%) or increase (if producers do not sign protocols of a new level with VAT or processors decide to attract additional volumes at higher prices without VAT). The price may also go down (if processors, due to the seasonal increase in milk supply, decide to reduce their purchase prices without VAT. Then the price with VAT, respectively, will fall below 6%).

But, under any of the scenarios, the bottom line after the adoption of this law in the market will worsen the relationship "manufacturer-processor" and there will be a redistribution of resource zones. At the same time, price changes will definitely be corrected by demand, if not at the end of March, then at the beginning of April.

The statistics of milk production in Ukraine in January confirms the trends of the fourth quarter - production in the category of agricultural enterprises, and hence the receipt for processing, is increasing (+2% compared to January last year), while the population is reducing volumes (-5%).

The number of cows is decreasing, but, as can be seen from the production statistics, agricultural enterprises compensate for the decrease in livestock by increasing productivity. The dry matter content also increases, so milk production grows even more significantly.

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