Russian milk market under pressure as herds decline

Related tags Milk

Steep declines in the number of milk cattle in Russia is having
knock-on effect on the country's dairy industry, which is being
forced to import increasing amounts of milk from other, more
expensive sources. But calls for greater support from Moscow to
develop new breeding programmes appear to be falling on deaf ears,
writes Angela Drujinina.

In the first six months of this year, the number of milk cattle in Russia declined by 5.7 per cent or almost 670 thousand head, with the inevitable impact on milk supplies: the overall amount of milk for processing declined by 657.6 thousand tons.

This, in turn, has led to a fall in output of dairy products, with the only growth last year (a less-than-impressive 2 per cent) seen in cheese and whole milk products.

Imports have, obviously, been the main beneficiary of the decline in Russian cattle herds. According to Russian Ministry of Agriculture data for the first six months of 2004, Russia imports 35 per cent of its butter, primarily from Finland, and cheese imports are also said to be growing rapidly.

According to ò. Ribalova, a leading scientist at the Institute on the Structure of Agriculture Market (IKAR): "With Russian dairy farms registering big declines in milk output, major dairy processors supplying the country's biggest cities are being forced to buy their milk elsewhere. These big groups are also paying more for the milk they need, effectively pricing smaller players, who tend to be focused on higher quality products, out of the market.

"The cheese and butter markets are suffering the most. For example, of the total quantity of milk supplied by farmers in the Uglich region, some 40 per cent is taken to Moscow. As a result, the production of some of Russia's best quality cheese - made by smaller companies in the Uglich region - has declined. In Vologda, butter production has decreased by 35 per cent,"​ added Ribalova.

D. Rilko, general director of IKAR, said that the real problem was that there was simply not enough money to support Russia's dairy sector. The stock breeding sector is currently regulated at a local level, with very little supervision - or financial assistance - from Moscow. Furthermore, Rilko suggested, what support there is tends to be focused on larger operators, many of which are loss-making.

The shortfall in Russian milk supplies makes the recent high-profile moves to block imports of milk and dairy products from a number of EU countries - widely thought to be a move designed to protect Russian firms from foreign competition - all the more difficult to understand. Without supplies from other countries, Russia is likely to have no dairy industry to speak of in a few years, and keeping consumption as high as possible is the best way of ensuring that federal funding is forthcoming in the long term.

But for now, Moscow seems to have no plans to give greater support to the dairy sector: recent draft legislation governing the regulation and marketing of agricultural products between 2005 and 2007 barely mentioned the dairy sector at all.

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