TheDairySite.com - news, features, articles and disease information for the dairy industry

News

EuroTier 2021: Strong future ahead for Russian dairy industry

01 March 2021

FOREIGN investors looking for good returns on their capital should look closely at the Russian dairy industry as the future holds very strong growth potential there, writes Chris McCullough with live coverage from EuroTier 2021.

That was the overall picture painted by Artem Belov, general director at the Russian National Dairy Producers Union, speaking at the digital EuroTier event.

The union is an overall body for around 2,000 companies including both farmers and processors and has big name members such as Danone and Kaufland who invest in the Russian dairy market.
Recent milk consumption in Russia has been recovering well following a big decline that lasted for many years.

From 2013 to 2018 there was a slide in consumption of dairy products in Russia from 245 million tonnes in 2013 to 229 million tonnes in 2018. Then the market picked up and the total for 2020 is 240 million tonnes.

“The main reasons for the decline in consumption was a drop in disposable income of the population,” said Artem. “The total decline was around 8% to 10% during this period. However, during the last two years, things have changed and we have seen an increase again in dairy produce consumption. I think the main reason for the increase in the last year is down to people self-isolating.

“More people were at home and therefore the consumption of cheese and butter, and a local product called Smetana (sour cream), went up because of an increase in home cooking,” he said.

Looking ahead to the prospects for the Russian dairy industry in 2021, Artem said it will be more difficult as costs have gone up.

“It will be a very tough year as the costs of production of raw milk and in the processing have gone up accordingly,” he said. “The costs of production in our estimations have risen 15% due to the devaluation of the Ruble currency.

“Also the costs of processing have risen by 5% to 7%, so the price of the milk on the shelf has gone up. My expectation for 2021 is not so positive,” he added.

Looking closely at the consumption of dairy products around the world, in the 2017 - 2018 year the top country was Finland with 452 kgs/capita per year. One of the lowest consumers in that same period was Japan with only 59 kgs/capita.

High consumers included Germany at 420 kgs/capita; Austria 398 kgs/capita and the United States at 283 kgs/capita. Russia was at the lower end of the scale with 234 kgs/capita.

“I think there is potential for the dairy consumption in Russia to grow by around 30%,” said Artem. “That would compare with Germany or Finland. Of course consumption depends on the real disposable income of the population, and I think in the future the economy in Russia will also get better. Investors will do well here in the future.”

Looking at imports, the dependence of the Russian domestic market on imports of dairy produce is decreasing.

“During the last seven years the imports of dairy produce to Russia declined about 25% to 30%,” Artem said. “I think this will decline more in the future as well by around 2% to 3% per year.”

Artem also highlighted the growth of domestic milk production contributes to an increase in self-sufficiency in milk and dairy products on the Russian domestic market. Commercial milk production has growth rapidly by 12% over the past three years, he added.

“In Russia we have two figures for milk production,” Artem said. “The first one is total raw milk production and the second is raw milk production for processing. This is because in Russia we have a lot of households with a few cows that produce milk for their own consumption.

“Total raw milk consumption has been quite stable over the last 10 years at around 30 million tonnes of total raw milk per year. If we talk about the total for processing, over the last seven years we have had a growth rate of 3% to 4% increase per year which equates to 800,000 to 900,000 tonnes per year.”

Artem explained these increases were down to farm modernisation, better yields per cows, intensification, better prices and significant state support of low interest rate loans.

TheCattleSite News Desk



Partners


Seasonal Picks

Managing Pig Health: A Reference for the Farm - 2nd Edition