Soyuzmoloko: changing the terms and conditions of state support of dairy industry reduces its attractiveness

"The most critical problem today is the annual change in the conditions of state support at the federal level - it reduces the investment attractiveness of the industry, despite the fact that dairy farming requires large investments and has a very long payback period", - quotes Danilenko the press service of the International agricultural dairy forum, which will be held in Krasnogorsk (Moscow region) on 17-18 November.

According to Danilenko, investors do not want to take risks, as it is necessary to take loans for 10-15 years. "The projects are not profitable without state support - it is a key component of the business plan so the annual change of conditions may lead them to bankruptcy because of the failure to comply with obligations to the banks. Besides, regional authorities do not have sufficient funds to offset the cost, if the Federal budget does not fulfill its obligations," - says the head of Soyuzmoloko.

Another problem, he said, is agro insurance, as "there are a lot of questions" to the terms of insurance.

Now representatives of the industry should focus on improving competitiveness, says Danilenko. "If we speak about dairy farming, Russian products can be competitive, and this is confirmed by the number of projects implemented over the last two years. When sanctions were introduced, everyone was worried about the cheese, but our producers have learned to make high-quality cheese," he notes.

Danilenko emphasizes that state support of the dairy industry should be viewed not as a subsidy but as an investment in the economy. "The industry receives about 26 billion rubles of state support annually, but the amount of taxes allocated to the budget is about 200 billion rubles. If the level of support rises the amount of taxes will increase" – states the head of Soyuzmoloko.

According to Danilenko, about 50% of the complexes for the production of milk in Russia are outdated and are not to be modernized.
 
"Soyuzmoloko has recently developed a program for the development of the dairy industry, where several key areas are outlined. The first is the financial incentive for modernization and construction of new facilities for the production of milk. In Russia only 15-20% existing facilities meet the required parameters nowadays, and about 50% are so outdated that even renovating them does not make sense," he explains.

Thus, now the Russian milk producers are dependent on bull semen from abroad. "In the 1990s - early 2000s the work on genetics was abandoned and now milk producers are very import-dependent from Europe and the United States. We need to develop the production of semen and productive breeds of cattle that are used on the complexes" - emphasizes Danilenko.

According to him, the average performance of dairy cows in Russia is approximately twice lower than in America and in the European Union, which significantly increases the cost price and reduces production efficiency.

Milk consumption decreases

According to information of Soyuzmoloko, in 2016, for the first time during the recent years, consumption of dairy products decreased. Executive Director of the Union Artem Belov relates this fact to income decline by 7-8%.

"Dairy products are one of the basic categories in the food basket of the Russians. They take a share from 15 to 20% in cash terms, and about 50% of this is accounted for milk. The decrease of income has significant effect on demand: if in the previous years, it was slowly growing, now it is declining," - says Belov.

According to his calculations, the demand for dairy products will reduce for the year by about 3% and the proportion of consumers that are limited to only basic products, the most affordable milk and yogurt, will increase.

"A lot of people will switch to cheaper spreads instead of butter, or cheese products instead of cheese. And this is a worrying trend, especially taking into account that Russia, in terms of consumption of dairy products, is far from health standards set by the World health organization. According to official statistics, in our country we have 240 kg of dairy products per year per capita, although in reality this figure is even less - about 190 kg per capita, and the recommended norms - 325-330 kg," - says Belov.

Read full article in Russian on DairyNews.ru