Milk is becoming a luxury product in Russia

Russian dairy market participants claim, country’s dairy industry is in crisis: raw milk production is decreasing, share of counterfeit and prices for dairy products are growing. Insufficient government support worsens the situation.

Russian dairy market participants claim, country’s dairy industry is in crisis: raw milk production is decreasing, share of counterfeit and prices for dairy products are growing. Insufficient government support worsens the situation. 

During the first ten months of the current year cows’ population decreased by 1.8% to 8.8 mln heads compared to the same period of the previous year. This is according to Rosstat data. Total milk yield decreased by 4% to 26.7 mln tons and by 4.1% in October. This is less than in 2005 – the worst period for dairy industry since 1990s, states Andrey Danilenko from Souzmoloko. 

While the production is decreasing Russia continues to increase imports of dairy products: according to Mr. Danilenko forecast, in 2013 the country may import up to 11 mln tons (on milk basis) against 9 mln tons in 2012. 

Raw milk production fall forces local producers to use more palm oil and milk powder. During the first 9 months of 2013 palm oil import to Russia increased by 36.5% to 567 thousand tons. It becomes more difficult for natural milk producers to compete with substitutes. 

Because of raw milk shortage prices were 15% higher during the summer period compared to the previous year. Price growth continued in autumn as well. 

Before the year end raw milk purchasing price may increase by 5-10%, now it is 30% higher compared to price of 2012 (around 20 rubles per liter, while official statistics shows 16 rubles). 

Around 50% of milk in Russia is produced at outdated farms. Due to insufficient government support and unpredictability producers do not have motivation to invest into new facilities. To support the industry Andrey Danilenko suggests to make subsidies equal for milk of different grades and in case of budget limitation to grant those producers who kept the population and production volumes. 

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30.01.2024
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