There are surpluses of milk in Russia
Russian dairy market continues to go down: the prices for milk and for commodity dairy products are gradually declining.
At the time when consumer demand is weakening, production of milk and dairy products is increasing in the country, making additional supply on the market.
According to Russian Federal Service of State Statistics, for January-February 2015, 2.22 mio t of milk were produced in Russia, which was 4% more in comparison with the same period of last year. It was produced 1.08 mio t in February, which was 3.8% more than in February 2014.
Production of fresh milk products continues decreasing. Production of processed milk decreased by 1.2%, fermented milk products – by 2.2% in February in comparison with volumes a year ago.
Production of milk powder considerably decreased in February in comparison with February 2014: SMP – by 32.6%, WMP – by 7.8%. High stocks were the reason.
Tendency is positive in production of cheese and butter – the products which are a subject of import substitution. Cheesemakers increased production of cheeses by 37.8%, cheese products – by 13%, whey powder – by 62.9% in February 2015 in comparison with the same month a year ago. Production of butter grew by 7% (mainly due to production of cheese products).
Rather high volumes of unclaimed fresh milk allows processors to refuse a reconstitution of butter and milk powder in favor of spot purchases of milk, and also to reduce gradually the milk prices.
Since the beginning of March, the processors have lowered milk prices by RUB 0.5-1.0/kg on average. Seasonal change of fat and protein content also influences the milk prices, therefore they already make RUB 20-24/kg.
Despite planned subsidies for dairy branch and additional resources of anti-crisis plan (not less than RUB 30 billion), this year will be very hard for milk producers. High season is still far, but milk prices is already almost at the verge of profitability. Good figures of milk production can probably be seriously worsened already in the second half of 2015.
This tendency will press the prices of commodity products, demand for which is weak. So, by that moment when sanctions will be cancelled, the foreign companies will not be able to return to Russian market immediately. It will be impossible not because of changes in certification by Federal Service for Veterinary and Phytosanitary Surveillance (according to S. Dankvert, the Head of the Service), but because the prices will already be unattractive in Russia.