Russian milk production is picking up after a successful 2017, encouraging news for an industry that is still adjusting to new market realities

Raw milk production volumes are rising nationwide, off the back of strong investment from foreign firms as well as government backing in the form of subsidies and loans. And with the industry recovery pointing to higher milk prices, further investment into the sector is coming.

Russian milk producers grow output 3.5% in 2017

Between private farms and major agroholdings, raw milk production reached a total of 15.86 million tons in Russia in 2018. As the headline proudly states, that’s a 3.5% rise in output volumes compared with 2016.

This continues a decade long-trend in rising milk output — although the decade itself has been a bit bumpy. In 2011, for instance, output volumes came to 14.3 million tons, before contracting to 14m the year after.

Collectively, including private plots, total milk exceeded 31 million tons in 2017.

As such, Russia is now 82% self-sufficient in milk. It relies on imports to fill the remaining 18% of domestic demand, but imports of milk have dropped 20% since the implementation of Russia’s ban on EU/US dairy goods in 2014.

These were the regions driving production output higher in 2017, according to Rosstat:

  • The Republic of Tartastan — 5.9% of milk produced in Russia — 1.8 million tons
  • The Republic of Bashkortostan — 5.5% — 1.7 million tons
  • Altai Territory — 4.5% — 1.4 million tons
  • Krasnodar Territory — 4.4% — 1.4 million tons
  • Rostov region — 3.5% — 1.09 million tons
  • Despite these encouraging rises, full self-sufficiency is unlikely to occur until 2025 at the earliest — so there is some way to go until Russia reaches its targets.

Milk use seeing industry change

The amount of milk used in production of certain dairy items has shifted a little in 2017. For instance, 1.5% less milk was processed for drinking in 2017, while a further −1% went towards fermented milk items.

Instead these “freed” volumes went towards production of a variety of products, such as:

  • Milk powder — +24.3% milk — 146,600 tons
  • Curds & whey — +16.5% — 140,000 tons
  • Cream — +16% — 145,500 tons
  • Butter — +7.5% — 266,000 tons
  • Cheese & cheese products — +6% — 641,000 tons

Increased milk output is helping Russia’s overall dairy sector reach new heights — but there are some problems in the industry. Overall drinking milk consumption has been falling between 2-3% year-on-year since 2014 — although this may be due to high retail prices, rather than a lack of available milk.

Russian milk manufacturers receive strong government support

In order to improve their production facilities, including modern milking equipment, milk processing machinery, and herd management systems, Russia’s dairy farmers are receiving government support. This comes in the form of both subsidies and loans.

For instance, dairy farmers were awarded 61.3 billion roubles (approx. $990m) in loans. This was enough to add an extra 500,000 tons of milk to total output in 2017, according to the Russian Ministry of Agriculture.

A further 8 billion roubles ($129.2m) was allocated to dairy cattle farmers to develop their herds further. Herds have shrunk somewhat in Russia since the collapse of the Soviet Union — although it has been noted that the US’ dairy farmers are producing twice as much with half as many cows, so improving efficiency may be worth more to Russian farmers than higher herd head counts.

In fact, development of competitive dairy stock is also another area government money is being spent on. 4150 farms have enjoyed a total of 17.3 billion roubles ($279m) in grants to raise and expand their herds. 670 additional farms received grants during 2017.

Dairy self-sufficiency: the target of the future

As we’ve mentioned above briefly, Russia is aiming at self-sufficiency in milk and dairy production. This is part of a broader plan to move Russia away from reliance on imported foodstuffs, and into a net exporter within the next decade.

Originally, the plan was to cut off all dairy imports by 2020. This is unlikely to happen for a number of reasons.

Firstly, there is the decline in livestock counts that isn’t necessarily being alleviated by more efficient work practices.

Another big point is the fact that production and processing equipment nationwide is old, facing obsolescence or already out of date. Modern equipment would greatly spur on the industry, making it more able to reach its government mandated sufficiency targets.

This is a greater trend happening across Russian agriculture. From crop farming to meat production and dairy, a lack of appropriate, modern machinery is holding the industry back.

But while this may close a window for Russia’s dairy farmers, it opens the door to international suppliers of necessary milk and dairy production, processing, and packaging technology.

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