Russian dairy sector: opportunities, priorities and trends

According to the Ministry of Agriculture, the level of self-sufficiency in milk last year was 84.1%, while the Food Security Doctrine assumes at least 90%. The head of the department Dmitry Patrushev said this at the XII Congress of the National Union of Milk Producers ("Soyuzmoloko"), which was held on January 27 in Moscow. There are good opportunities for further development in the dairy industry, the minister said.

2020 figures and results

Last year, the gross milk yield in all farms exceeded 32 million tons - 855 thousand tons more than in 2019, which was the best result for the last decade. The average milk yield per cow reached 6.6 tons, which was a record. The Ministry of Agriculture hopes that the positive dynamics will continue this year, and the production of raw milk will increase to at least 32.6 million tons. For this, in particular, it is necessary to develop a highly efficient forage base and the genetic potential of animals.

Cows

In 2020, Russia exported dairy products worth $300 million which was 12% more than in 2019. Over five years supplies to foreign markets increased by a third. The Ministry of Agriculture continues to work to open up new opportunities for the sale of dairy products, despite the difficult conditions associated with the covid pandemic. At the same time, the primary task of the industry is to ensure the domestic market.

State support and priorities

Last year, 28.3 billion rubles were allocated to support the dairy industry, this year the volume of state support will remain, Mr. Patrushev assured. At the same time, new measures will appear, in particular, the opportunity to take soft loans for the purchase of feed. Also, among the additional measures to support the dairy industry, Mr. Patrushev called an increase in the export duty on soybeans and rapeseed to 30%, which, according to him, should reduce the cost of feed on the Russian market and the costs of milk production.

Last year was generally good for the agro-industrial complex and the dairy sector in particular, but 2021 will be more difficult. A new challenge will be that from June 1, the phased mandatory labeling of dairy products should begin. After numerous negotiations with business, the conditions for labeling have now become loyal, market participants still have time to prepare for its introduction and resolve all issues in order to prevent the disappearance of dairy products from stores. Moreover, if Russian companies are not ready for labeling, Belarusian manufacturers can quickly take their place.

To reduce the financial burden on enterprises in connection with the need to label products, the Ministry of Agriculture will give them the opportunity to take soft loans for the purchase of labeling codes, as well as equipment for their application. The corresponding order is being registered now, Dmitry Patrushev specified.

One of the growth points of the dairy industry is the development of processing. It is necessary to modernize the existing processing facilities. Starting next year, milk processing can be included as a priority in the incentive subsidy. The Ministry of Agriculture also plans to introduce subsidies for plants that process milk from cattle, goats and sheep. Subsidies are intended for agricultural producers, with the exception of citizens who have personal subsidiary farms, and agricultural credit consumer cooperatives, as well as organizations and individual entrepreneurs engaged in the production, primary and (or) subsequent processing of raw milk.

The situation with the reimbursement of part of the capital costs incurred in the implementation of projects is more complicated. It is an attractive support measure for investors in the dairy business, but it was previously discussed that after 2021 these subsidies would be canceled.

Dairy

Trends, new niches and opportunities

Trends and opportunities of the dairy industry were discussed at the plenary session of DairyTech Expo which opened on January 26 in Moscow. The event was attended not only by business representatives, but also by government officials who shared their views and perspectives.

2020 ended more successfully than expected and the industry has huge potential. However, there are risks for business in 2021: for example, an increase in the cost of raw materials and milk processing, as well as a continuing decline in household income.

Despite the decline in income, the consumption of dairy products did not decline, although the scenario of consumer behavior has completely changed. Rosselkhozbank predicts continued growth in the consumption of dairy products and does not see any prerequisites for a decrease in investment activity in the dairy industry.

In addition, there is another opinion of the market players saying that the population has already spent their savings, and incomes will continue to decline, and this may cause difficulties with demand. However, production is growing because nowadays the demand for dairy products is not fully satisfied and new directions appear in the market. First of all, they are associated with new trends: in particular, special attention to health and the desire to save money. So, a consumer becomes more segmented and more niches are created in the market.

Sources: Agroinvestor, The DairyNews, DairyTech