How the pandemic affected the Russian dairy market in 2020
Revenues were falling, but demand did not decline
Artem Belov, CEO of Soyuzmoloko, believes that the purchasing power of Russians is the main regulator of demand for dairy products. According to him, in the first half of 2020, the income of the population decreased by almost 4%. However, this did not affect the reduction in consumption of dairy products, as some experts predicted, which is explained by the measures taken by the Federal government. Among them - the provision of 400 billion rubles for social support of the population, the closure of borders, so that solvent compatriots spent their summer holidays at home. The head of Soyuzmoloko also noted that in 2020, the demand for sour cream, butter and cheese increased in Russia, as people began to buy more of those for cooking home-made dishes.
The expert does not expect a recovery in the population's income next year, and, consequently, an increase in demand for dairy products. The consumer opportunity of the population will remain at the level of 2020. People will start buying cheap dairy products with a milk fat substitute.
Positive dynamics of production
This year, the increase in the volume of raw milk will reach 3.8%, in 2021 - 3%. According to the analysis of Soyuzmoloko specialists, this is due to state support, the introduction of new enterprises and cattle farms. Artem Belov said that the increase in milk production is observed among all the leading Russian players. A third of them have increased their production volumes by more than 20% and plan to expand in the future, increasing the growth rate.
Change in the cost of raw milk
Raw material prices in the current year increased by an average of 4% compared to the level of 2019, which did not cover investment costs and operating costs. Experts report an increase in the cost of raw milk production since the beginning of 2020 - on average by almost 15%, and by some indicators up to 60%. The head of Sozmoloko attributes such a jump to an increase in export prices for feed and cereals, which was one of the reasons for the decline in the profitability of the domestic dairy industry.
The trend of processing growth has continued
The positive dynamics is explained by the increased consumer demand, as well as the decline in the ruble exchange rate, thanks to which domestic producers won. Compared to imported dairy products, Russia has become more competitive, replacing foreign cheeses, butter, milk powder and whey from the domestic market. According to Artem Belov, the weakening of the ruble contributed to the growth of exports of dairy products, which in 2020 increased by 20%. This pace is expected in the coming year.
Imports are declining
In recent years, the volume of dairy products imported into the country has decreased, and in 2020, imports decreased by 200 thousand tons. We are talking about whole milk powder, skimmed milk powder and whey. At the same time, the supply of fermented and whole dairy products from Belarus has increased.
The decline in the ruble exchange rate and insufficient domestic demand opened up new markets for Russian producers to sell dairy products abroad in 2020 – to Saudi Arabia, Algeria, Egypt, Taiwan and Japan. Dry dairy products began to be exported to China. To increase the share of exports, the government of the Russian Federation has developed state support measures, including certification, concessional lending, and so on.
Lots of cheese
Analysts report large stocks of cheese and cheese products, especially in some regions of Russia. The average increase was 14% compared to the year 2019. At the same time, it is said about low stocks of milk powder, both in Russia and in neighboring Belarus. All this, according to experts, may lead to an increase in the cost of raw milk in the coming year.
How the state helps
According to the Head of Soyuzmoloko, the state has been actively supporting the dairy industry for the past 5 years. Additional assistance in the context of the pandemic was provided this year, and funding for the 2020-2021 programs will continue. Moreover, new areas for preferential loans will be introduced, and a preferential VAT rate will be provided for the import of breeding cattle.
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