One more problem has been added to the well-known problems of Russian dairymen this season.
Photo: Maria LENTS
To the well-known problems of Russian dairy producers this season, another one was added: the purchase prices for milk suddenly went down sharply, in other regions they are already much lower than the cost, which makes it unprofitable to keep cows and produce milk. Against the backdrop of falling incomes, livestock breeders again started talking about the gloomy prospect of sending cows under the knife.
INCOME – 1 RUBLE PER LITER. AND THIS IS GOOD…
Communities of animal breeders in social networks are full of sadness. “Even at the beginning of the year, they bought 25 rubles, now they give 22 per liter,” a farmer from the Rostov region shares sad arithmetic. – The cost price is almost 21 rubles, it turns out – I earn 1 ruble per liter … ”“ You are still lucky, ”comment it from the Altai Territory. “We already have 19, they say that it will fall to 17 at all.” “We have gone into the red for a long time,” complain from Chuvashia. – From us, from private traders, they already take 16-18 rubles each, my husband and I do not see other options for parting with cows. The neighbors have already sold their cattle…”
And this is happening in many regions. Discussing the suddenly collapsed purchase prices, farmers assure that now they are at the level of 5 years ago, although during this time all consumables have risen in price: from feed and fertilizers to diesel fuel, electricity and equipment. The sadness of many livestock breeders is multiplied when they recall that they have received loans and grants for the development of farms – what to give if there is no profit? And they themselves answer – only by selling cows for meat. And all this is happening against the backdrop of another gloomy picture – every year the dairy herd in Russia decreases by an average of 100 thousand heads. And ahead of a new alarm – the season of big summer milk, when purchase prices traditionally fall …
But what happened and what caused this collapse? Experts name several reasons for what happened.
“PROCESSORS CANNOT BUY THE PREVIOUS VOLUME”
– This topic is directly reflected in the statistics: last year, 2 million tons of marketable milk was added in the country, – says Babken Ispiryan, an agrarian expert, head of the Association of Peasant (Farm) Farms of the Kaluga Region. – Many large farms have been launched and are being launched, so overstocking has appeared – plus 40 percent to the usual level of stocks. It was reported that stocks of only SMP (skimmed milk powder) accumulated 3.3 times more than last year. And processors cannot buy the same volumes. On top of that, we have a rather low export of milk, here business and the state have something to work on in order to send the surplus to other countries. At the same time, consumption of dairy products has decreased in Russia.
And you can’t argue with this: according to dairy market analysts, in 2022, sales of cottage cheese desserts fell by 18.6%, yogurts – by more than 15%, sales of sour cream, cottage cheese and kefir decreased slightly, but still.
– There are several factors to reduce consumption, – an independent agricultural expert Alexander Korbut commented to Komsomolskaya Pravda. – Firstly, rising prices: in the conditions of crisis development and a decrease in real disposable incomes of the population, a cumulative type of consumption has formed – to save money, they began to buy less. First of all, it hits the most expensive goods. In addition: if you compare the cost of animal protein derived from milk and the cost of poultry protein, then for the most part, milk loses. Now, I think, there will be a recovery in demand: money began to come in and consumer behavior is changing, but this is a long process and I personally do not expect quick changes.
As another reason for the decline in demand for milk, experts cite the fact that large foreign milk processors have stopped investing in advertising, and, consequently, in the promotion of dairy products.
“WITHOUT YOUR OWN PROCESSING, IT IS ALREADY DIFFICULT TO MAKE MILK”
As a result, experts are sure that small farms and household plots (personal subsidiary farms), which do not have their own processing and sale and are highly dependent on third-party processors, will suffer the most from this situation.
– Large complexes and farmers will survive, but it will be difficult for everyone else, – continues Babken Ispiryan. – Meanwhile, agricultural holdings continue to build and open new large farms, so on average there will be even more milk.
– There is a rule: the smaller the farm, the higher the cost, – says Stanislav Sankeev, Executive Director of the People’s Farmer Association. – In the Volga region, the price of milk of not the highest quality has fallen sharply in small remote farms. The processor, if he goes to them, deducts transportation and other expenses, and in some places they offer 19-20 rubles for such milk, which puts them on the verge of profitability. And many have started talking seriously about the destruction of livestock, there really is such a threat. Then these people will never be returned to animal husbandry.
– This is a big danger, it’s not only farmers, but also small dairy farms of 100-200 heads, – Alexander Korbut agrees. – I do not think that there will be a shortage of milk, but a significant increase in beef production, slaughter is possible. I definitely won’t be happy about this, because it lays problems for the future.
But consumers, according to experts, are unlikely to benefit from this story.
– A significant reduction in the cost of production is not to be expected, somewhere, except that the rise in prices on the shelves will slow down, – adds Babken Ispiryan. – The most annoying thing is that it is not manufacturers who make money on this, but processors and networks. They claim that they have a minimum margin, but there is a suspicion that it is not 10-15 percent, but much more. And one of the ways out for dairy producers is to create their own processing, including straying into cooperatives. It is already difficult to deal with milk without its processing and sale.
SEPARATELY
Head of the Council of the Dairy Union of Russia Lyudmila MANITSKAYA:
“MARK-UP OF RETAIL CHAINS – LIMIT, FOR SCHOOLCHILDREN – A GLASS OF MILK”
– The situation is complicated. Signals come from many subjects, including Tatarstan, Tula, Vologda regions, Krasnoyarsk, Krasnodar territories and other regions. And there are several reasons for that. Last year, the consumption of dairy products decreased, as a result, this led to a decrease in processing: fermented milk products – minus 8 percent (yogurts in it – by 16 percent), kefir – minus 5 percent … When fast-food products (sour-milk) are reduced, they are forced to grow production of milk-intensive products – powdered milk and butter. Processors do this with milk when demand decreases, directing it to high-capacity and storable products. All this falls into warehouses, they are now overstocked with butter, dried milk and cheese.
The main factors behind the drop in demand are the decline in real disposable money income in 2022 and food inflation. On the other hand, retail chains set entry price thresholds such that they actually control the range of dairy production. That does not prevent them from further setting their markups of 40-70% and higher, and for high-margin types and all 100-150%.
Therefore, now we have seen a sharp decrease in the purchase prices for raw milk by processing plants, starting from February-March. The level of reduction is 15-20% of the previously contracted prices, from 4 to 7 rubles per kilogram of milk.
What to do? In the current situation, we should focus on strengthening state support measures, including targeted additional subsidizing of production per 1 kg of milk to at least partially cover losses from lower purchase prices. It is also possible to stimulate the consumption of purely dairy products by banning the use of milk fat substitutes – vegetable oils. Establish trade margins for retail chains – in our opinion, they should not exceed 35%.
In addition, it is necessary to develop the social project “School Milk”. Its essence is to give students 200 ml of milk daily in addition to the main diet. This will load the capacities of enterprises in the regions, provide a distribution channel and generate additional demand in the domestic market. At its peak, the program covered 55 regions and over 20 million students of all ages. Now the number of regions participating in the program has been reduced to about 18. The main problem is funding, regional budgets save money on this. Therefore, federal co-financing of this project is necessary.
It is also possible to remove surpluses of stored products and reduce overstocking with the help of state interventions – the purchase of powdered milk for state needs, in reserve.
