Milk Crisis in Russia and Belarus: Solutions

The current crisis in the Russian dairy market is systemic. And it requires systemic solutions. Participants and market experts expressed their opinions on the state of the dairy industry and why RUSSIA and Belarus need to jointly solve current problems.

PROTECTIONISM OF THE MINISTRY OF AGRICULTURE

The Ministry of Agriculture of the Russian Federation has included a policy of dairy protectionism. The consequence of this was the appeal of the Dairy Union of Russia (RSPMO) to the FAS. In a letter from the industry association, signed by the executive DIRECTOR Lyudmila Manitskaya, it is indicated that the measures proposed by the Ministry of Agriculture are "unprecedented interference in the economy."

The Ministry of Agriculture did not hesitate to respond - the media published a column signed by Anatoly Kutsenko, Director of the Department of Economics and Market Regulation of the Agroindustrial Complex, in which he gives examples of how in the fall of 2008, when prices for MILK produced in the European Union began to fall, the EU agriculture ministers adopted as part of the HEALTH Check program, a whole range of measures to protect European farmers. In particular, it was decided to increase the quotas for milk production. Israel has a government policy regarding the planning, production and promotion of dairy products, the management of powdered milk stocks and the implementation of production quotas. The shortage of milk is eliminated by issuing licenses for the import of powdered milk and dairy products.

“In Russia, the current decline in prices for raw milk is due to the growth in production and the lack of effective mechanisms for controlling the supply of powdered milk, ” notes Anatoly Kutsenko.

According to the Federal Customs Service of Russia, last year more than 172,000 tons of powdered milk were imported into the country. The amount of smuggled goods is not exactly determined, but according to expert estimates, it may be a comparable volume.

“We discussed the situation with official supplies in the framework of recent negotiations with our Belarusian colleagues. They account for almost 80% of milk powder imports. We agreed on common approaches to coordinating the balances of supplies of milk and dairy products. The Republic of Belarus also supported the Russian initiative to create a single company through which all deliveries will be made and which will monitor the quantity and quality of the supplied products, ” says Anatoly Kutsenko.

Together with agricultural producers and conscientious processors, the Ministry of Agriculture began to track the dynamics of refusals to purchase raw milk. To date, the list of “refuseniks” includes 49 companies from 20 regions of Russia. At the same time, some of the companies included in the list of the Ministry of Agriculture are marked by Rospotrebnadzor as a manufacturer of counterfeit products.

“The discrepancy between the interests of milk producers and processors is obvious. In principle, processors do not care what kind of milk they use: produced in Russia or delivered, for example, from New Zealand. It is important that this be as cost-effective as possible. The analysis of the Ministry of Agriculture showed that the processing enterprises are only half loaded. One of the reasons for the lack of demand for raw milk is unfair competition, that is, the presence of “cheese-like products” in circulation. Therefore, it is necessary to increase the level of control over the import of “cheese-like products,” Kutsenko emphasizes.

In addition, the Ministry of Agriculture believes that the approval of the methodology for determining milk powder in finished products, the consideration of the possibility of limiting the use of milk powder in the production of cheese, as well as vegetable fats in the production of all dairy products, will contribute to market stabilization. The introduction of mandatory long-term contracts between milk producers and processors and the unconditional introduction of electronic veterinary certification throughout the country will also help.

If the situation is not changed, the losses of milk producers this year may exceed 84 billion rubles, the ministry says.

OPINIONS OF INDUSTRY PARTICIPANTS

RSPMO regarded the initiatives of the Ministry of Agriculture as an "unprecedented intervention" of the state in the market economy, and the signing of the proposed agreements and contracts by dairy enterprises would be a violation of competition law. In addition, the union recalls the instability of the quality of Russian raw materials throughout the year.

“At the same time, the union supports the introduction of EMU and the punishment of unscrupulous entrepreneurs - smuggling suppliers and counterfeit producers,” the letter from the RSPMO says.

Many of the experts and representatives of enterprises do not support strict quotas for powdered milk from the Republic of Belarus, however, they agree with the need to introduce serious penalties for manufacturers and suppliers of counterfeit products.

“The topic of cooperation with Belarus is currently on the cutting edge of the dairy market. We are all looking for external enemies, and they are inside us and our dairy market. The Belarusians are doing their job, to protect themselves from them under a far-fetched pretext, not in a partnership way, it is necessary to develop the domestic industry. The measures of the Ministry of Agriculture are bewildering: the same problem with the import of counterfeit products is inflated to incredible proportions, and often with the involvement of not very knowledgeable citizens. As a result, the people develop a persistent distrust of products - we ourselves discourage the buyer from the shelf, ”says one of the market participants, who wished to be named unnamed.

Experts are sure that the systemic crisis in the dairy market of the Russian Federation has a number of key reasons, writes The DairyNews.

Director of the Dairy Market Research Center (CIMR) Mikhail Mishchenko notes that the situation on the dairy market of the Russian Federation today is a “boomerang” of sanctions imposed in 2014 by the food embargo.

“We were one of the largest buyers of cheese in the world and after the market closed, European producers faced a significant surplus of this product, as a result of which they switched to the production of milk powder. What used to be processed into cheese for the Russian market is being processed into powdered milk. An additional driver was the earlier abolition of quotas in the EU. The European Commission in 2015 included an intervention mechanism in order to sell milk powder in 2016-17. But this did not happen, ”the expert notes.

He notes that the second factor of the current crisis is the unformed industrial consumption of milk in the domestic market of the Russian Federation.

“The government supported the milk production industry in every possible way, without thinking about where the milk would be sent. As a result, we have inefficient owners who do not know how to produce inexpensive milk and insufficient industrial consumption of raw milk, ” says Mikhail Mishchenko.

The third and very significant factor is the huge number of products on the market with substitutes for milk fat and protein.

“These products are destroying the market, the price and requirements for dairy products are decreasing as a result, and we have the desire of processors to buy not raw milk, but substitutes, ” emphasizes the director of the CIMR, speaking of support for the measure announced by the Ministry of Agriculture to exclude from the technical regulation “On the safety of milk and dairy products” cheese-like products containing vegetable fats from 50 to 100%.

“ I didn’t think about how much Russia needs Belarusian milk: our enterprise is located in Siberia, it’s impossible to deliver such products to us. We live on our own raw materials. Of course, the economic conditions in which the producers of both states exist are not the same. But the task of the government is to properly organize the work within the industry. We need to develop our own production, and not restrict imports, ” comments Boris Degtyarev, director of Favorit Factory.

Arkady Ponomarev, a member of the State Duma's agrarian committee, notes that it is in the competence of the state to close down enterprises that produce counterfeit goods and stop the smuggling of products. “The antimonopoly service has enough powers to abolish the dictates of retail chains. If necessary, Russia knows how to be uncompromising in relation to dishonest foreign partners. Examples of this are the embargo against Western countries, the blockade of supplies in excess of quotas from the Republic of Belarus. Often, by the way, the supply of low-quality and contraband products, ” the expert expresses his opinion in an interview with Kommersant.

The director of the Magnitogorsk Dairy Plant, Igor Stolyarov, notes that "the dairy market needs to be balanced, and today it is oversaturated with milk from local suppliers."

“Quotas for imported products are undoubtedly needed. It is difficult to assess on a national scale how great the dependence on supplies from Belarus is. But the range of products on the shelves is quite large, from foreign to various domestic ones. We are forced to buy cheap milk from Belarus, while destroying domestic farms. This is wrong: imports from Belarus should be reduced, we should rely on domestic producers,” Igor Stolyarov expresses his opinion.