Markets Processing

Russian Ban Could Create Dairy Market Pressure

ANALYSIS - European dairy prices are set for more pressure, this time at the hands of Russian food import bans until alternative buyers can be found.

12 August 2014

2 minute read

Europe

This is according to UK levy board DairyCo’s market intelligence team which expects the EU to have to wait until alternative customers can be sounded out.

It added that marketing opportunities should be created by those nations filling Russia’s shortfall.

This is unless Russian consumer patterns change ‘significantly’, DairyCo caveated in a statement on Friday.

Russian sanctions add to wholesale prices dropping over the spring and summer, mirroring Global Dairy Trade performance.

News reports of negotiations between Russian and South American trade officials suggest Russia will look to this region to make up food import shortfalls.

With close to a third of European cheese exports heading into Russia each year and a quarter of Butter sales, the effect on European dairy markets will be significant, analysts say.

The US meanwhile ships minimal quantities of dairy produce to Russia.

Over recent years dairy imports to Russia have steadily increased, making it the biggest butterfat and cheese importer.

In light of falling wholesale prices, the EU dairy industry has seized the opportunity to repeat requests for supply management instruments as a major customer shuts is doors on EU product.

Describing the effect on EU dairy demand as 'significant', European Milk Board (EMB) President Romuald Schaber said: "The EU needs market instruments to prevent such market blips resulting in disastrous crises."

He requested a 'supply regulating instrument' to curb production, which would stop prices plummeting, emphasising the importance of such a feature as farmers prepare for market liberalisation.

He added: “The EMB has developed a crisis concept that can defuse such situations. The politicians have to start discussing this instrument now”.

In the face of losing major trade ties, EU Commissioner of Agriculture and Rural Development Dacian Ciolos has spelled out the protective role the Common Agricultural Policy should provide to farmers.

His message was that finding new markets quickly is key, calling for a ‘joined up, European response’.

Outlining his actions on Monday, he said: “I have already instructed my Services to establish a Task Force to analyse the potential impacts sector by sector, and to assess how we can effectively provide meaningful support if and where this is needed.

“Second, my Services will today call a meeting of senior agricultural experts from all EU Member States, to take place next Thursday.”