The price will go up

Prices for milk and dairy products will definitely grow, believe experts of the Summer dairy summit, held at the IX Dairy Olympics, reports The DairyNews. According to analysts and market participants, prices for dairy products will be volatile, but will retain the tendency to further growth. Domestic markets will be dependent on political and economic factors, but it won’t change the factor of the need in the milk protein of growing population.

CYCLES BY MILK

According to some experts, the growth should be expected both in the current year and within the five-seven year cycle. Asian countries are actively increasing the consumption, and the European dairy companies announce maintaining the level of purchase prices and even make a decision about growth. So, according to FrieslandCampina in June we can expect rising prices for milk, butter and cheese.

In Russia, according to the Russian Dairy Research Center (RDRC), despite the decline of milk prices in considered by the Center regions-exporters, the price of imports continues to drive RDRC index growth. Dairy Index RDRC on 29 May 2017 made 24.74 RUR/kg (without VAT, with fat and protein 3.6% and 3.0% respectively), 0.28% higher than last week.

"We've discussed a lot (in the framework of the Summer dairy summit - ed.), the demand for milk and dairy products. The dairy category has actively recovered after the drawdown in 2014 and 2015. It seems to me that if we talk about five to seven-year cycle within this period prices will rise. I think, first of all on the markets of Southeast Asia, where volume of consumption are rapidly increased. Price, in this sense, for raw milk and finished products will also grow. There may be some setbacks, adjustments, but in general it seems to me that in the coming years we will see a rise in prices for dairy products," expressed his opinion the Executive Director of Soyuzmoloko Artem Belov.

According to the Director of the Russian Dairy Research Center Mikhail Mishchenko, the market will be volatile and there won’t be any stable trends in growth or decline of prices. "It is objective. Because the demand may be rapidly formed somewhere and may be rapidly declined at some point in the world. And until this situation calms down, the market is susceptible to volatility. It is very difficult to predict something for a long period", - the expert said in the debate at the Summer dairy summit. The analyst of INFAGRO Maxim Fasteev agrees with him.

"In the future, consumption of dairy products and protein in the world must increase. But the world market is characterized by high volatility. So it is impossible to speak definitely about the rise in prices. In the long term – yes, consumption causes the demand thus, the price must grow, but some trends - incidental, demographic, political - really affect the situation now," explained the opinion Maxim Fasteev.

15 YEARS AHEAD

Due to the long payback periods of milk production, milk producers need to think 15-20 years ahead. As noted by Igor Berengolts, Managing partner of the Wall Green, the main thing in this matter is production efficiency.

"What the price for milk will be is not very important, because if the milk price will rise, the price for feed and grain will rise as well. What really matters is effectiveness. 30% of profitability is in the production itself. This can be achieved by technological solutions. That's all," - said the expert.

Georgy Khatiashvili, co-founder of Georgian Association of cheese makers noted in an interview with The DairyNews the trend of development of Eastern countries.

"It is believed that East Asian countries will begin to produce as much milk as it was produced on the European continent and in America. And if earlier the main exporters were New Zealand, America, Europe, in five years, I think, the situation will change. Manufacturing will remain at the same level, but the Eastern direction will be developed much stronger," - said Georgy Khatiashvili.

According to participants of the industry, investment cycles of dairy farming vary greatly in countries around the world. If one of the characteristics of the EEU is dependence of the growth of investment in the production of milk and dairy products on the state support, Europe and China resist the limited land resources (EU) and the extremely high production costs (China). What will be the development of milk production and the price of it, will largely depend on political factors, participants believe.

By the way, in the Republic of Belarus the increase of the price for milk is expected to because of the difficult situation with forages. "In the next year or two the price of milk will rise, at least in our country (note – Belarus), probably in Russia, too. This year we have a very difficult situation with forages: weather conditions did not allow growing green mass. So the price will increase," - said the Head of the Chief Department of foreign economic activity of Ministry of agriculture and food of Belarus Alexei Bogdanov at the Summer dairy summit.

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