Chained together: how the situation in Belarus will affect the Russian dairy market
The political situation can greatly affect the economy of the Republic. Daily peaceful (and sometimes not entirely peaceful) strikes, rallies in Minsk, the capital of the country, and road closures can have a strong impact on many sectors of the economy.
This instability in the Republic of Belarus forces the dairy market to calculate all possible scenarios - from the mildest to the most fatal. The DairyNews analyzed how what is happening in the Union country can affect the dairy market of Russia, its closest neighbor.
Russia as a sales market for Belarus
As of the end of 2019, the Republic of Belarus supplies dairy products to 57 countries. In total, the country accounts for 6% of the world's dairy trade, said Maria Klimova, Deputy Head of the Main Department of the processing industry of the Ministry of agriculture and food of the Republic of Belarus in February.
At the same time, Russia is one of the key markets for Belarusian dairy products. According to the Dairy Intelligence Agency, the share of the Republic in Russian dairy imports has increased to 90% over the past 6 years (after the embargo was imposed). According to the Federal Customs Service, in June 2020, the share of the Republic of Belarus in the import of cheeses was 85.88%; the share of butter reached 74.12%; imports of whole milk powder - 99.28%, skimmed milk powder - 94.03%; whey powder - 88.44%.
Traditionally, the share of Belarusian dairy products on the domestic shelf is significant. The volume of deliveries of dairy raw materials is also large. How can negative political trends affect the dairy relations between Russia and Belarus? Can such a long history of partnership be disrupted?
According to Alexander Polyakov, a member of the Council of the Russian Union of dairy industry enterprises (Dairy Union), today there are no reasons for the limitation of the supply of dairy products from Belarus to Russia.
"What is happening affects the market more psychologically. People are afraid of uncertainty and try to stock up for the future. However, nothing should change. Most likely, there will be a devaluation – this is a likely development in such "instability" – there will be nothing to hold the currency rate. Devaluation does not mean a rise in price, but a reduction in the price of goods, a weakening of the Belarusian ruble against the dollar. In addition to psychological fears, I do not see any reason why something could change for the worse in the issue of dairy products supplies to Russia from the Republic of Belarus. It is highly unlikely that any government (old or new) will stop deliveries. We are the main market for Belarus and there is absolutely no reason for them to restrict supplies", said Alexander Polyak. The expert added that for Belarus, Russia is the key market for cheeses; 80-90% of butter also goes to Russia and as for skimmed milk powder, our country is a much more profitable market than any other is.
"Whatever happens, I see no reason to restrict the supply of dairy products from Belarus to Russia. Yes, for a brief moment, there can be anything. However, this will not have an impact in the medium term. And people who succumbed to market panic will most likely get the result as in April/May - they will just lose money", added Alexander Polyak.
Dmitry Matveev, CEO of GC Kabosh, in an interview with The DairyNews also confirmed that Russia is the main market for the Republic. If a "barrier" suddenly appears on the border with Russia tomorrow, it will lead to the collapse of the Belarusian economy. Moreover, Russia, in turn, can easily find other countries that will replace Belarusian products on the shelves.
"No matter how hard the Belarusian authorities try to assure that they have alternative markets, no one needs their products in such volumes. As for China, yes, they can actually supply whey and milk powder there. However, Europe, like China, does not need such dairy products of Belarus, as milk, kefir and sour cream. It is impossible to supply the Belarusian cheeses in such quantities to anywhere, except Russia. Therefore, Belarus will never ban its deliveries. We do not depend on Belarus for the supply of dairy products, but it depends on us", Dmitry Matveev concluded.
Boris Fishman, Commercial Director of the company Milkou, noted that the influence of the Belarusian dairy market on the Russian market is not evident in all products. The price of commodity products, for example, skimmed milk powder, rose and settled at the level of 190-195 rubles/kg. There is no milk powder and whey left in the Republic, and the Russian market "lives in isolation from the Belarusian one".
"From the point of view of the dairy industry, cheese is the only thing that Belarus has in really large quantities. But there are no changes in sales, sales have not been affected, and even if sales fall, it will only mean a boost for Russian manufacturers, who will feel easier", Boris Fishman said.
At the same time, the expert noted, the price of cheeses may actually increase. However, the Republic of Belarus does not occupy such a dominant position in the cheese market that it can have a significant impact on the situation.
The comment of Zinur Gainanov, Commercial Director of the limited partnership Syr Starodubsky partially echoes the statement of Boris Fishman. The expert noted that there is a second side to the supply of dairy products from Belarus – the goods of Belarusian producers enter Russia through the domestic market of Belarus at lower prices than the minimum export prices set for Belarusian factories.
"For us, as a major Russian manufacturer, this is an additional problem. As for the impact of political events in Belarus on the Russian dairy industry, we do not expect it at the moment. Here, in Bryansk region, Belarusian-made products are widely represented on store shelves – including whole-milk products and cheeses. In Bryansk region there is no shortage of finished dairy products, in particular Belarusian", the expert stressed.
It should be noted that in Belarus, there was no noticeable impact on the supply of dairy products to Russia. Anonymously, many market participants interviewed by The DairyNews note that all contracts for the supply of products are fulfilled on time.
"We are doing well with deliveries of products from our plant to Russia. Our company supplies cheeses and butter to Russia, about 600 tons of cheese and 100 tons of butter per month. However, as for the difficulties – we had some questions about butter. We increased our stock reserves, because the indicator was not working, and in February we saw a decrease in the price to 290 rubles/kg. The price remained at about the same level until June. After that, some progress began, and now the price has gone up. There is a shortage on the Russian market, and the established price - at the level of 305 rubles - is a good indicator for us", said the representative of the Belarusian dairy company.
A similar statement was made at the dairy and canning plant from Vitebsk region:
"At the moment, all shipments from our company go to Russia as planned. We hope that this will continue, we will continue to work fruitfully with Russia, and there will be no reduction in supplies. So far, I cannot mention any negative points in this issue. There is a fixed schedule of shipments, which we clearly follow", said the representative of the plant.
Thus, as we can see, the eyes of fear see danger everywhere, and today we do not have to expect any obvious reductions in the import of Belarusian dairy products to Russia. However, as experience shows, you need to be prepared for any scenario, even if the probability is not on its side - a year ago, many would have been surprised to hear that in April the whole world will go to a three-month quarantine due to a virus obtained from a bat eaten.
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