Murky milk

The Chairman of the Board of Soyuzmoloko Andrey Danilenko said that the Union after the factor analysis on a monthly basis is going to provide an index of the cost of a liter of milk. As it was reported to The DairyNews by the press service of the Union, currently the work on index is coming to an end and it will be presented to the public at the end of March – the beginning of April.

Meanwhile, Danone and PepsiCo, being the largest milk processors in Russia, have already offered the use of the index Soyuzmoloko as an option the method of forming a purchase price. From the industry Association statements about the indicative prices for raw milk are announced with a known frequency. In August 2010 Andrei Danilenko told reporters that the milk producers offered the processors to set upper and lower limits of the purchase price. Then it was stated that the meaning of price range is that manufacturers are willing to voluntarily limit the upper limit of the purchase price at which they supply their milk to plants. In response, dairy producers wanted assurance that next summer the purchase price of this product will not fall below a certain minimum. The corridor of indicative purchase prices for milk was established in Russia in 2010-2012 as the recommended range of sales costs. The measure was introduced by the Ministry of agriculture to make market environment more predictable in conditions of significant fluctuations in supply of raw milk because of the seasonality of its production in Russia.

Under market conditions many experts called the price corridor utopia, however, in 2015, the proclamation was repeated. In the summer of 2015, then Head of the Department of animal husbandry and breeding of the Ministry of agriculture Vladimir Labinov said that the FAS and the Federal agricultural Department has taken a decision on inexpediency of the price corridor.

In 2016, the indexes for raw milk raised during the preparation of the authorities to the "white" interventions involving purchases for the state intervention Fund of milk powder and butter.

It has to be noted according to data for 2015 provided by the Russian Dairy Research Center (RDRC), the company "Danone Russia" processed 1.6 million tons of milk (9.36% of the total volume of milk processing in the country), "PepsiCo" - about 1.5 million tons (8.78% of the total volume of milk processing in the country).

The DairyNews talked with a number of suppliers of the company Danone, which confirmed that at the event in Saint Petersburg the option of forming purchasing prices may become the use of the indicative of Soyuzmoloko).

"At the Day of Danone supplier in Saint-Petersburg there were discussed methods of forming purchasing prices for raw milk based on the index of the cost of Soyuzmoloko. The company did not disclose details of the formation of purchasing prices for milk; there was only the preliminary scheme. They have not done all the necessary calculations yet. I understand that they will test this method on some pilot farms", - commented Dmitriy Lukyanenko, Director on animal husbandry of the enterprise "Detskoselskiy". "We plan to continue cooperation with Danone", - said the representative of the agricultural holding.

Mikhail Mishchenko, Director of the Russian Dairy Research Center (RDRC) notes that the use of the index of the cost Soyuzmoloko will not affect the purchase price, because the price is formed taking into account the balance of supply and demand. "Probably this is done in order to customize their "wishlist" to the reality. Only a private entrepreneur can form a price on the basis of cost, but not the industry. Perhaps here we are talking about some bargain prices. In my opinion, the Federal Antimonopoly Service must deal with this problem ", - said Mikhail Mishchenko.

As noted by the farmer Vladimir Koshmanov prices are formed by the market, and formation of indices is a secondary issue. "If someone sells to Danone at the prices set in any way, it means that it is the market price. They can use all sorts of indices to calculate prices. I was under the impression that the use of the index of the cost Soyuzmoloko is just a way to achieve decrease in procurement prices", - said Vladimir Koshmanov. – "It would be nice to make an index of the cost, and most importantly availability of credit and also somehow use it to reduce the cost of loans and increase their availability, including the ones for farm holdings", - he stressed.

As it is known, any indicator can be turned in one’s favor, especially with regard to the possible influence exerted on the formation by the large player.

"I took part in the Day of Danone supplier in Saint-Petersburg. I can say that Danone developed a fairly accurate system of predicting milk prices. They analyze all the main components of cost of milk, particularly the cost of feed and premixes, of course taking into account the inflation rate. Maybe this system will change somewhat. If the index Soyuzmoloko is objectively calculated, it will be interesting. Another thing is how Danone will use it" - said Anatoly Shundeev, director of the agricultural cooperative "Koelginskoe" named after Shundeev I. N." in an interview with The DairyNews.

At the time of publication the FAS of Russia did not offer any comments of the material, but they noted that the request publication on the subject is being worked on.

In Danone they couldn’t provide quick commentary on the index of cost of production of milk, at PepsiCo, it was said they would not comment on pricing issues.

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