Feb 13 - On January 31, 2009, the Russian government announced Resolution No. 71 that will increase the import duty on butter (derived from milk) to not less than 0.35 Euro/kg, up from 0.22 Euro/kg; and Resolution No. 72 that increases the import duty on milk (and cream) from 15 percent ad valorem to 20 percent.
Minister of Agriculture Aleksey Gordeyev stated recently that production costs for domestic milk is higher than farmgate prices. In addition, several prominent Russian government officials have commented in recent weeks that these new measures are aimed at protecting domestic dairy farmers from “unfair competition” claiming that major exporting countries greatly subsidize their dairy sectors and, thus, give them an unfair advantage. The new duties take effect March 7, 2009 and will be in place for a period of 9 months. It 2008, the United exported roughly $50 million worth of both of these commodities.
Russia significantly increased imports of dairy products in 2008. Dairy butter imports from January-September 2008 reached 65,000 MT (valued at $192 million), compared to 58,557 MT (valued at $119 million) during the same time in 2007. Major suppliers to Russia of dairy butter include New Zealand, Finland and the United States. Imports of milk and cream to Russia reached 18,115 MT from January-September 2008 (valued at $56 million), compared to 3,411 MT (value at 14 million), during the same period a year earlier. Whey imports are up 33 percent – from 34,457 MT in January-September 2007 to 45,870 MT from January to September 2008.
Production
Domestic milk output remains well below the target outlined in Russia’s National Priority Project (NPP) for Agriculture. The number of cows in milk is forecast to decrease slightly to 9.7 million head in 2009 compared to 9.8 million head in 2008. Ministry of agriculture officials expect the national herd milk yield average in 2009 to reach 4,000 kilograms per cow compared to 3,798 liters per cow in 2007. This is well below the genetic potential of imported pedigree dairy cows and leaves room for considerable growth in Russia’s average per-cow productivity merely through better nutrition, proper veterinary care, and adoption of modern herd management practices.
The Russian ministry of agriculture recently announced a new draft program titled, “Development of Dairy Cattle Breeding and Increase of Milk Production in 2009-2012”. This program aims to introduce modern industrial technologies in milk production by improving the quality of dairy cattle breeding. For example, the program would provide subsidies to dairymen for purchase of registered pedigree dairy cows, pedigree bovine semen, and bovine embryos. The program aims to increase milk production from 32 million metric tons (MMT) in 2007 to 37 MMT by 2012. Per cow milk annual productivity might reach 3,950 MT, and calf crop – 78 heads in 2009. In order to attain a stable domestic milk supply and level seasonal milk production it was also envisaged to commence intervention in the Russian powdered milk market. The total volumes of subsidies from the Federal budget will account for 20 billion rubles (approximately $556 million ).
Approximately half of Russia’s milk production is still produced on private subsidiary plots. In 2007, the last year for which complete data are available, out of 32.2 MMT of milk produced in Russia, 16.3 MMT was produced in the commercial dairy sector. As the aging rural population continues to dwindle, and is not replaced, room for expansion by profitable commercial dairy farms is expected to unfold. In general, commercial dairy farms showing gross profitability of at least 35% tend to stay in business and expand; dairy farms with lower than 35% gross profitability tend to go out of business.
Ministry of Agriculture Takes Measures to Support Milk Production
The Russian ministry of agriculture is taking steps to push for higher milk farmgate prices in order to stimulate milk production. The current slow growth rate of milk production can be attributed to a drop in purchase price for milk and reduced demand caused by higher imports of powdered milk. As a result, the ministry of agriculture pushed through a new technical regulation on milk and milk products where products manufactured with any amount of powdered milk must be called milk beverage and not milk (RS8046). This technical regulation is expected to lead higher demand for fluid milk enabling agriculture producers to obtain better prices.
Trade
Russia significantly increased imports of dairy products in 2008. Dairy butter imports from January-September 2008 reached 65,000 MT (valued at $192 million), compared to 58,557 MT (valued at $119 million) during the same time in 2007. Major suppliers to Russia of dairy butter include New Zealand, Finland and the United States. Imports of milk and cream to Russia reached 18,115 MT from January-September 2008 (valued at $56 million), compared to 3,411 MT (value at 14 million), during the same period a year earlier. Whey imports are up 33 percent – from 34,457 MT in January-September 2007 to 45,870 MT from January to September 2008.
Minister of Agriculture Aleksey Gordeyev stated at a Federation Council meeting in the autumn of 2008 that Russia must produce 95 percent of all dairy products consumed in order to achieve true food security. Currently domestic dairy production manages to provide roughly 73 percent of locally produced dairy products. Gordeyev also stated that Russia does not need to be importing such high volumes of dairy products such as cheese, dry milk and butter and complained that major suppliers of dairy to Russia significantly subsidize their producers putting Russian dairymen at an unfair advantage. Gordeyev promised to take measures that would curb this trend.
