Fuel for milk

Measures to reduce excise taxes on gasoline by three thousand rubles and diesel fuel by two thousand rubles (per ton from the current rates), effective since 1 July 2018 do not have a certain period of action, the authorities said. The DairyNews have learned the opinion of the dairy market participants about the government's initiative and its impact on the price of products on the shelf.

Wholesale prices of petroleum products in Russia have been constantly growing since the middle of February to the middle of May and are now at record levels. In addition, the prices at gas stations have been actively growing in the domestic market for the last few weeks. According to experts, there are several reasons that contribute to the growth of exchange and retail fuel prices in the Russian Federation, including: the growth of world prices for oil, the weakening of the ruble, the growth of excise taxes on petroleum products, spring repairs of refineries, the active period of agricultural work, as well as seasonal demand for fuel in spring and summer.

Meanwhile, in the dairy industry the spring-summer season is characterized not only by "high milk", but also by a decrease in demand for dairy products.
Some market participants call the current situation a bubble that is about to burst. However, according to the majority of respondents, milk producers are accustomed to the seasonal growth of fuel, despite the fact that lower fuel prices would facilitate significantly the work of farms and dairy plants.

"At the moment, there is an increase in the cost of fuel, and this year this trend is not for the first time. The price of the products does not grow so the manufacturer gets less money. Sooner or later, this bubble will burst. We cannot raise prices, the population is not ready for this: solvency at low incomes remains low", commented one of the participants of the dairy market, who wished to remain anonymous.

Alexey Manyakhin, sales specialist of LLC “Suvorovo”, in turn believes that the reduction of excise taxes is unlikely to stop the growth of fuel prices.
"Additional fuel costs increase the cost price. Logistics in Tambov is increasing, the growth of new outlets is registered and new positions are entering the market. But due to the fact that gasoline becomes more expensive every day, the revenue decreases. There are trading networks on the market that work with promotions and individual offers for the client. Due to this, the sale of the total amount of milk within the region will remain at the same level", said the expert in an interview with The DairyNews.

Meanwhile, Suren Obayan, General Director of "Dairy plant “Myasnikovsky”" stressed in the comment that despite the increase in fuel costs, consumer demand for dairy products remains stable. Further increase in fuel prices could lead to a reduction in supply flexibility, but now the company is positively looking at the situation and the role of reducing fuel excise taxes, which would help to stabilize the market.

However, in Omsk region they intend to ask the government to deal with the uncontrolled growth of fuel prices. This was said by Alexander Burkov, acting Governor of Omsk region to journalists on Monday.

"In the coming days the government of Omsk region will be forced to apply to the Prime Minister Dmitry Medvedev [with a request] to take urgent measures to restrain the growth of fuel prices. Today, the price of fuel is negatively affecting not only the villagers, tomorrow it will affect the price of bread, food, budget of each family. This is the first step in the acceleration of inflation, it is very dangerous," said Burkov, noting that the increase in fuel prices kills the agriculture of the region, as agricultural enterprises are forced to spend huge amounts of money on fuel during the sowing season, which, coupled with falling prices for grain can lead to losses.

Earlier, the Russian authorities proposed to raise excise taxes on fuel every six months, however, in case of their further growth, the Ministry of Finance now predicts an increase in prices for gasoline to 20-30%, which is significant primarily for ordinary consumers, say representatives of the Cabinet of Ministers.

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