Artem Belov: the increase in the cost of milk will hit the economy of enterprises

‘Since 2020, the growth rate of cost has increased significantly. This was facilitated, first of all, by a significant increase in the cost of the feed base, as well as the weakening of the ruble exchange rate and an increase in prices for mineral fertilizers. All these factors contributed to bringing the cost of milk production to a new high level, which is unacceptable for many farms,’ Belov said.

‘Some make a decision to reduce the number of cattle and reorient activities, for example, to crop production, others - to revise diets in order to reduce their cost, which leads to a decrease in milk productivity and volumes of milk production. These phenomena are not of a mass nature, but can be considered as market signals about the deterioration of the economic condition of milk producers,’ he added.

In addition, the cost of processing has also increased by 12-14%, depending on the category of dairy products. According to the General Director of the union, market participants face many difficulties in terms of implementing labeling projects in practice: first of all, it concerns the implementation of solutions and the readiness of integrators to supply equipment.

‘In this regard, we are witnessing a very serious increase in the cost of packaging for those enterprises that choose a typographic method of applying labeling codes. Other relevant administrative measures include the tightening of the environmental agenda - both in terms of the implementation of ERM projects (expanded responsibility of manufacturers - ed.) for the disposal of packaging, and in terms of carbon regulation. All this seriously affects the economy of enterprises,’ Belov said.

‘The increase in the cost of milk production and processing was not compensated with an increase in sales prices either in the raw materials or in the processing sectors, in connection with which many enterprises in the industry faced a significant decrease in the profitability of milk production and sale, and in some cases the activity became unprofitable,’ the agency interlocutor added.

According to Belov, in the medium term, the dynamics of prices for dairy products may be due to the delayed influence of growth factors in the cost of its production in 2020-2021, as well as the growing cost of imported dairy products (the share of imports is about 16%). ‘As necessary measures, Soyuzmoloko proposes to maintain the existing measures of state support for the sector, as well as to consider the possibility of increasing the budget for a subsidy of 1 liter of commercial milk to support the operational activities of producers. In addition, targeted food aid for socially unprotected strata would become an effective tool to support demand under the conditions of the reduction in real disposable incomes of the population,’ he concluded.

On Wednesday, the Izvestia newspaper reported that the Ministry of Agriculture of the Russian Federation sent a report to the government, which examines the situation with prices for various categories of products. According to the publication, the only category in which the Ministry of Agriculture has allowed an increase in prices is dairy products: the rise in price of products may be affected by an increase in the cost of production, as well as costs due to the introduction of mandatory labeling.