While milk production is expected to increase by 2.8 per cent to 32 million metric tones (MMT) for the year, production targets set out in Russia's National Priority Project (NPP) have not been met. This has resulted in further price rises in the future, says the USDA's latest report on the country's dairy industry.

The market conditions reflect the growing pressure on dairy processors in the country to offset high raw material prices, as demand for milk-based products - particularly form emerging markets like Russia - tightens milk supply further.

According to the report, growing demand in the country, driven in particular by butter and cheese products, will create a number of challenges for the country's dairy industry, as well as opportunities for foreign producers and processors.

Milk production within the country will continue to increase into 2008 on the back of continued replacement of low-yielding domestic cows with higher quality animals, the USDA said.

However, this has failed to prevent a 12 percent increase in the price for milk and dairy products expected to continue into the New Year.

Imports

In order to stem these price increases, the Russian government last month employed price freezes on domestic food producers and retailers for some food and beverage products, the report said.

In a further step to prevent massive price surges, the USDA also noted that in some cases, Russia had also moved to liberalise trade with some neighbours to ensure milk supply.

Source: foodproductiondaily.com