Importers and exporters: the problems of the domestic market of milk

A weekly Dairy Index RDRC on 14 August 2017 was 24.55 rubles/kg (without VAT, fat and protein content 3.6% and 3.0% respectively), by 0.49% lower than last week and 9% above the average Dairy Index RDRC in August 2016.

The average price for milk in the “regions-importers” and “regions-exporters” has decreased by 0.17%, according to the Russian Dairy Research Center. The index of import price fell by 1.2%. 

We will remind that in total in Russia for the first half there was produced 15 252.4 thousand tons of milk (+0.6% compared to the same period last year). Agricultural enterprises increased milk production by 2.7% to 7.88 million ton. The sector of farm holdings showed an increase of milk production by 8.9% compared to the same period of 2016 – in total there was produced 1.08 million tons. In smallholders, as follows from the materials of Rosstat, milk production decreased by 3.1% to 6.2 million tons.

"Now we are observing the following trend – 3 enterprises are closed every year. Our region is also experiencing a shortage of milk. We have sufficient processing capacities, but there are not enough producers", - says Valentin Chernoglazov, the Head of LLC "OSNICHEVSKIY".

More, less or equal to 

In Altai Krai processing enterprises lack high-quality raw milk, taking into account the amount of capacities for the production of cheese and cheese products. 

"Altai Krai produces much more than it consumes. Consumption in our region is decreasing due to declining purchasing power, but also because of the rather high price of cheese. Sometimes the consumer sees the low price of the cheese product and buys it. Cheese products are now replacing real cheese in the region because of the high prices,"- said Alexey Krysanov, Director of "Ust-Kalmanskiy butter and cheese factory". 

It has to be noted that according to Rosstat, production of cheese by Russian enterprises for the six months of 2017 increased by 1.7%, cheese products - by 10.7%, reports The DairyNews. In June production of cheese amounted to 41.7 thousand tons (-3.1% compared to the same period last year), and cheese products were produced in the amount of 15.4 thousand tons (+7.1 to the same period last year).
We will remind, the consumption of cheese in Russia falls due to the decrease of product quality, at the same time production is increasing, said the Director of the Russian Dairy Research Center (RDRC) Mikhail Mishchenko at the conference "Prospects of development of cheesemaking in Russia. The area of Altai Krai and Republic of Altai" held in the framework of the Motor Rally "Way to milk!". According to RDRC in 2016, the production of cheese, cheese products and cottage cheese in the country in terms of raw milk increased by 33% - to 9.94 million tons. In some regions, the increase was even more substantial, for example, in Altai Krai (growth by 36%) and Kaluga region (an increase of 242%). However, the experts note that Altai Krai may lose the leadership in the cheese industry. "Altai Krai is, of course, a major producer of cheese in Russia (the first place in the country in terms of production). But this is not enough, and the region may lose its position if it does not take emergency measures on the development of its production", - said earlier during the Motor Rally "Way to milk!" the Head of RDRC Mikhail Mishchenko. The expert believes that today's producers need to "compete not on price but on quality".

The Head of the Krasnokamenskiy dairy plant (Zabaykalsky Krai) Vladimir Yunusov has noted the shortage of raw milk in the region. "Money is not allocated for dairy farming in our region or a very small amount. It is also quite difficult to get loans. Zabaykalsky Krai is experiencing a shortage of milk; we import milk and process it. We have more than enough processing capacities. The average purchase price of milk is equal to the price of milk powder, it is about 20 rubles, for our region it is quite a good indicator" - the expert says.

Regional Director of LLC "Sibirskaya Niva" Sergey Lyakhov notes that Novosibirsk region is a surplus region (editor’s note - we will remind, the region is in the list of regions-exporters of the Russian Dairy Research Centre). "More than half of the volumes that we produce, we are forced to supply outside Novosibirsk region. Although some finished products with added value then again return to Novosibirsk, as it is the main city of Siberian Federal district, we do not enough processing facilities for ourselves", - says Sergey Lyakhov.

"For Altai region, which produces excessive amount of dairy products, which we cannot fully consume, the quality of the products sent by our companies for export to other regions of Russia is very important. Our dairy plants can process about 2 million tons; so far we haven't processed more than 850 thousand tons. In addition, we are importing about 140-150 thousand tons of milk from other regions. Accordingly, we need to increase our own resource base", - says Mikhail Chmyrev, Deputy Minister of agriculture of Altai Krai.

In addition to a lack of capacity, lack of raw materials, market participants mention questions to operation with GIS "Mercury" and the lack of state support, which most farmers successfully cope with. We will remind that since January 1 in Russia electronic veterinary certification of milk and dairy products becomes mandatory, and the Federal Ministry of agriculture has repeatedly stressed that EVC will be introduced without further extensions of the transition periods.

"We buy about 50% of milk from individual farms and small farm holdings, respectively, and we are not sure that our suppliers will have been ready to work in the system “Mercury” by 2018. We do not understand how we will interact with them and with this program. If we talk about the whole region, the processors are getting ready. But there are still some questions," - said Alexey Krysanov.

According to participants of the dairy market in the regions, the vast majority of processing enterprises are not ready to work with the EVC since 1 January 2018 and have a number of questions, most of which refer to unresolved problems of access to stable Internet across the country, training of specialists, problems of the return of batches and the time frame of  veterinary certificates.

Import and export of raw materials in the domestic market today has a quite well-built logistics system. The shortage of raw milk in some regions and the lack of processing enterprises in others make market players find the possibility for selling on a major scale, and for dairy plants – to protect the resource base. According to market participants, today it is possible to do a gradual alignment of the balance of raw material and its processing. Although in any case there are such large producers of raw milk as Tatarstan, which potentially will remain exporters of milk for a very long time.

Read more to study the statistics of regions-importers and regions-exporters of the Russian Federation on the Dairy map of Russia. 

Read full article in Russian on DairyNews.ru