Dairy gambit
Milk producers have set themself against retailers dictate. The current state of longstanding conflict between retailers and farmers may be referred to as “PR-wave”. The latter prepared a PR-explanation for sell price growth. The defeated party of the conflict is the consumer, who is forced to purchase products at higher price, but nobody is interested in it. The government, whose duty is to stop immediately conflicts of this kind, is just observing from a distance.
Several months ago the State Duma offered to limit the trade markup for socially significant foodstuffs, including milk. But the project was put into cold storage. Recently the Ministry of Agriculture published a notice about the coming milk deficiency and dairy products price increase. Strange, but the notice was published at the period of “spring flush” – at summer period the milk yields are traditionally high.
Andrey Danilenko, Chairman of the Board of SOUZMOLOKO, brings some sense into the situation. When Russia prepared to join WTO the previous year, the government said: “Impossible to compete the import in price – it costs 10-15% lower – all right”. The retailers then said: “If you can’t meet the same price level as the foreign suppliers – all right, we will take the import”. The milk producers decided to cut yields and cow herd population.
As a result starting from the previous year raw milk production level decreased by 5%, according to official data. According to SOUZMOLOKO, the decrease exceeded 10%. The emerged deficiency provoked raw milk price increase by 25% in the beginning of 2013. The importers decided that the market would “swallow” price increase on their products as well.
But, here is some data from Rosstat. Average purchase price for raw milk in Russia decreased by 4.74% to 14.78 rubles per kg starting from January. Dairy cattle population decreased during the year by 2% only – primarily due to the draught. It turns out that the farmers sacrificed only 2% of herd – a piece – to win the whole game then. 25% sell price increase is at stake. According to the Institute for Agricultural Market Studies (IKAR), average purchase price for milk in July 2012 was 1 ruble lower compared to the current price; this corresponds to the inflation rate.
Though, one can’t say this struggle is absolutely senseless. For example farmers from Ulyanovsk Region managed to adjust the price to 17.20 rubles per liter.
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