Today, Russia, like the rest of the world, is gradually removing restrictions that cannot last forever. The economy, production, and services sectors are trying to get back to work and somehow offset the actual downtime that many have faced in recent months. Despite the fact that the dairy industry, as well as the entire agro-industrial complex, was not directly affected by the coronavirus, the crisis provoked by global and local lockdowns has already affected the sales of products and not only. Details and comments fr om industry participants can be found in the article of The DairyNews.
Among the main difficulties encountered by producers and processors during this period, the first one is the decrease in the purchasing power of the population. Many representatives of the service sector lost their jobs, many were subjected to layoffs and salary cuts.
"The future situation on the market will depend on the purchasing power of the population. We do not export products, we are interested in the domestic market. If the population has money to buy products, it will be easier to survive the consequences of the pandemic. Otherwise, it is very difficult to calculate what will happen to production", said Anatoly Nikiforov, head of the Agricultural production cooperative "Kilachevsky".
However, as the expert said, the Agricultural production cooperative had the strength to overcome the consequences of the coronavirus due to an increase in milk production last year. This made the situation smooth.
"Last year, we had a good start for next year, we partially launched the second complex, which allowed us to increase milk production by 2,800 tons. At the same time, purchasing prices for milk remain at the level of 2017, this has somewhat smoothed the situation, despite the growth of prices for feed, medicine, fuel and electricity", added Anatoly Nikiforov.
Nikolay Kireev, General Director of the Ichalkovsky cheese factory, in a conversation with the correspondent of The DairyNews noted that in recent months, the purchasing power of products has decreased significantly.
"As a percentage, we see a decrease of 20%. Retail chains have significantly reduced the volume of orders, as well as wholesalers. In their regard, the figure is even higher – about 30%", said Nikolay Kireev.
Yuri Goryainov, Commercial Director for Eastern Europe at Fibosa, also noted a serious decline in the industry.
"The market has frozen. Almost all major players have postponed investment projects until better times. The market has taken a wait-and-see position, everyone is waiting for the end of the quarantine. Almost no one is engaged in serious investments, at most - dairy enterprises are trying to maintain a stable level of production. As far as I can observe, the market has faced a serious drop in sales of dairy products", said Yuri Goryainov.
John Kopiski, Director of LLC "Rozhdestvo", stressed that due to the pandemic, he had to close one of the stores due to restrictions. However, he emphasizes that the economy is working steadily, and gradually the sale is being restored:
"We are opening our main store. Yes, everything could be better than it is now, but it could be worse! With the growth of cheese production, we plan to open a store in Moscow. We have also increased the production of cheeses with longer aging - now we produce cheeses with a maturation period of 10 weeks instead of 6. These cheeses are more popular with customers", said the cheese maker.
What will happen next?
Perhaps the main question that interests everyone now is "What will happen next?” Representatives of the industry have different answers to this question, but it is obvious to everyone that we need to continue working. Moreover, there is no one to expect accurate forecasts fr om.
"We continue to engage in the production of milk. Now we are expanding trade, in the past we had problems with selling pork live weight. We open our own branded stores, for example, in Yekaterinburg and Irbit. We are doing this to increase the sale of meat, including beef and pork", said Anatoly Nikiforov.
As for measures to support production - a few weeks ago, the Central Bank lowered the key lending rate to a historic low under the influence of a deep drop in domestic and external demand. Is there a possibility that this will help the industry?
"If we talk about reducing the key rate – let's recall the situation in 2014. Then the Central Bank rate increased, and banks quickly increased the rate from 1.5% to 2%, referring to the Central Bank. Now it also reduces the key rate, and banks are not in a hurry to do this. Therefore, we have not noticed a reduction in the interest rate of preferential lending yet", the expert concluded.
"Expectations from the market, frankly speaking, are not comforting. At the moment, everything is closed, the market is just opening. At the same time, no one reduced either the rates or the rent payment for the premises – despite the fact that many were closed, no one removed the payment obligations from us", said Nikolay Kireev.
The expert also does not see anything positive in the reduction of the lending rate. In his opinion, this will not solve the urgent problems, the main of which is the problem with labor resources. Because of this, the investment attractiveness of the industry has no source.
"The reduction in the lending rate will not affect the current situation in any way. Foreigners are increasingly supplying spare parts here. Our main problem is human resources. Everyone goes to work in Moscow, there are not enough employees. This is a common problem across the country and in rural areas, with fewer breadwinners every year. Farms and factories are being built – but we need workers", said Nikolai Kireev.
"The complexity today is in complete uncertainty. No one knows what will happen next, and wh ere the market will move. A reduction in the key lending rate may have a positive impact on the market, if it continues in the future. But, I repeat, no one is trying to invest now", also noted Yuri Goryainov.
John Kopiski is optimistic about the future of the industry. Its cheese products continue to be in demand, despite a drop in purchasing power.
"It is too early to say what will happen. Of course, the economic situation has developed so that there are problems with purchasing power. But our main customer - middle and business class, continues to buy cheese. Sales are stable, and the summer season is in full swing. We hope that everything will be fine", said John Kopiski.
Alexander Kaznacheyev, Deputy Chairman of the Board of Credit Bank of Moscow, gave an assessment of the state of the dairy industry in Russia. In his opinion, maintaining the production potential of industries that form strategic food reserves will require maximum support.
"According to our estimates, it is too early to confirm a positive scenario for the development of the industry. We should not underestimate the dynamics of the spread of infection in the regions of Russia, wh ere the main part of the detected cases has shifted. Our Bank has adjusted its plans for financing companies engaged in crop production, dairy and meat farming. In this regard, the volume of using the mechanism of preferential lending to the Ministry of agriculture and the Ministry of economic development of the Russian Federation will increase", Alexander Kaznacheyev said.
The banker also added that it makes sense to allocate support to the food industry.
"State support through subsidies for purchases of grain, flour and other raw materials for production, in our opinion, can solve the problem of restraining food prices, and maintaining the volume of the domestic market in conditions of reduced demand and export quotas", the expert concluded.
Therefore, the main thing that can be learned from what the experts said – the dairy industry is waiting for serious work to restore. However, it is unlikely that manufacturers or processors could be surprised by the phrase that they will have to work hard. The main thing is that this work should be appreciated and supported.