Oil drops, milk grows
Источник: The DairyNews
Oil price drop is likely to result in agricultural products price fall, estimated European Commission experts in 2014. It was connected with the fact, that agriculture is an energy-intensive sector. During the last year food prices all over the world were decreasing, including dairy products. But does this tendency work in Russia?
EC experts and market participants estimated that oil price drop would result in agricultural products competitiveness growth in EU. They also didn’t exclude impact of more cheap import energy resources on other sectors.
Already in 2017 EU expects significant growth of food export – as a result of competitiveness increase. According to analysts, European farmers are competitive enough to keep the current volume of milk production in the mid-term period. But in the longer term under low oil price and absence of demand from Russia agricultural prices may decrease to the level which may lead to big bankruptcies among agricultural companies.
According to Deputy Head of the Center for Economic Forecasting at Gazprombank Darya Snitko, direct influence of oil price on Russian agricultural sector is very weak, but the indirect influence is rather significant.
From all Russian agricultural sub-sectors only the fertilizer manufacturing one is connected directly with oil market as far as petroleum commodities (mainly natural gas) are used for nitrogen fertilizers production, and gas prices are connected with oil prices.
Speaking about depreciation of currency and its influence on the dairy market, the expert noted, that it increased the production expense portion – meaning first of all growth of capital investments and price for certain imported ingredients – like ferments and additives.
According to the expert reduction of consumer purchasing power opened new opportunities. Consumers are not ready to pay more for dairy products, so that it will be difficult for producers to transmit production cost increase into the final prices. So, some suppliers get new opportunities to develop import-substituting production, especially in the B2B segment, the expert said.
Already in 2017 EU expects significant growth of food export – as a result of competitiveness increase. According to analysts, European farmers are competitive enough to keep the current volume of milk production in the mid-term period. But in the longer term under low oil price and absence of demand from Russia agricultural prices may decrease to the level which may lead to big bankruptcies among agricultural companies.
According to Deputy Head of the Center for Economic Forecasting at Gazprombank Darya Snitko, direct influence of oil price on Russian agricultural sector is very weak, but the indirect influence is rather significant.
From all Russian agricultural sub-sectors only the fertilizer manufacturing one is connected directly with oil market as far as petroleum commodities (mainly natural gas) are used for nitrogen fertilizers production, and gas prices are connected with oil prices.
Speaking about depreciation of currency and its influence on the dairy market, the expert noted, that it increased the production expense portion – meaning first of all growth of capital investments and price for certain imported ingredients – like ferments and additives.
According to the expert reduction of consumer purchasing power opened new opportunities. Consumers are not ready to pay more for dairy products, so that it will be difficult for producers to transmit production cost increase into the final prices. So, some suppliers get new opportunities to develop import-substituting production, especially in the B2B segment, the expert said.
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