Increased subsidies in Russian dairy sector

Russia has decreased its dependence on milk imports by over 30% in the last six years, Agriculture Minister Dmitry Patrushev said at the International Milk Forum in Krasnogorsk last Tuesday.

Last year, milk imports fell 7.2%, to 6.5 million tonnes, meaning that the "share of domestic production in the Russian milk market is growing steadily," Patrushev said.


"We're obliged to work on decreasing import dependence in the dairy industry. Today the situation is right for that. Milk production is growing steadily in Russia; in 2018, it totaled 30.6 million tonnes. We're also expecting growth for 2019 as a whole. Much of the credit for the increases in these figures goes to small and medium-sized dairy farms and companies," he said.

Commenting on the inclusion of milk products in the Mercury electronic veterinary certification system, Patrushev said, "Today it's already obvious that the system allows us to decrease administrative barriers for businesses when they're completing accompanying veterinary documents. Additionally, it significantly increases the safety of dairy products in Russia."

"We've gotten through this year without sharp fluctuations in milk prices. In 2019, the entire set of measures we've undertaken and, among other things, the Mercury system allowed us to avoid spikes," he said.


Export potential

The dairy industry is appealing to investors and has good export potential, according to Patrushev. This year, agricultural exports are expected to total $24 billion, including more than $1.1 billion in dairy products, he said.

EAEU countries are still the primary consumers of Russian dairy products, accounting for about 60%. "In addition, last year, the markets of Laos and Cambodia were opened up for deliveries of Russian milk and dairy products. The opening of the promising Chinese market in 2018 was a big success. Today 34 dairy companies have the right to deliver products to China, and 49 are selling ice cream to China. This year, Russian dairy products got access to Tunisia and Turkey. These are also areas of the utmost importance," Patrushev said.

Subsidized lending for investment projects in Russia's dairy industry will increase by almost 30% to 89 billion rubles in 2020, Deputy Agriculture Minister Yelena Fastova said at the Dairy Forum.

"The main mechanism that the Agriculture Ministry is developing is subsidized lending. For dairy we have preferences. While the average duration of an investment project is up to eight years for other sectors, for dairy it's up to 15 years. Investment loans are provided for construction of dairy farms, and milk processors can also receive a loan for up to 15 years," Fastova said.


Subsidies for investment expenses

"Everything is unchanged in this regard, and 89 billion rubles has been allocated next year for this type of support, which is almost 30% more than this year," Fastova said, adding that "everyone who decides to apply will receive this support."

Speaking about short loans, she said that, following many requests from industry representatives, a decision has been made to raise the limit for such loans for one organization to 600 million rubles in 2020 from the current 400 million rubles. "The relevant order of the minister will be signed soon and, accordingly, banks are aware of this," Fastova said.

She also said that 131 investment projects totalling 5.9 billion rubles received support under another type of state support - subsidies for investment expenses - in 2018, and in 2019 there have been 107 such projects totalling 5.2 billion rubles.

"This type of support will remain for next year. We have a question about filling the budget for this type of support, because we now only have 100 million rubles in the budget. I hope that we'll find the funds for this type of support," Fastova said.

Support in the form of reimbursement for up to 30% of capital expenditures on construction of infant formula plants will also remain for 2020-2022, she said.

Fastova reiterated the Agriculture Ministry's earlier forecast that milk production in Russia will grow to 31.1 million tonnes this year. "The main increase will come from agricultural enterprises, which are growing by more than 4% annually. There is a decline at private household farms. The overall picture is not bad," she said.