Forecasts from the Foreign Agricultural Service and Moscow predict annual production to drop two per cent to 29.3 Million Megatonnnes.
Pressure will be subsequently felt in certain areas of the dairy product market, with analysts predicting processors to “take advantage” of reduced availability.
Imports are heavily restricted from Europe, Norway and Australia and residue and labelling complications mar Ukraine products, leaving Belarus as the main source of fluid milk.
After reading the USDA report, a DairyCo spokesperson said: “Only part of the drop in Russia’s liquid milk supply is forecast to be met by increased imports, mostly from neighbouring trade partner Belarus.
“Cheese imports are predicted to drop by 134,000 tonnes (37%) in 2014 although it is anticipated that domestic processors will increase cheese production by 20,000 tonnes by 2015, replacing some of the previous import volumes.
“With butter, forecasts suggest that domestic manufacturers will increase production sufficiently to replace the banned import volumes.”
Meanwhile, Russia’s national herd continues to decline, despite great modernisation in segments of the sector.
Domestic production continues to be characterised by small-scales “less-efficient farms”, wrote the USDA.
Production costs remain high for many producers, with subsidies underpinning farms and businesses across the whole dairy sector.
The Russian National Union of Milk Producers (Soyuzmoloko) has developed an industry support proposal through to 2020.
Soyuzmoloko posited that $10 billion (427 billion rubels) would be required from 2015 to 2020. The document includes “economically proven” measures of state support, including a warning that, without subsidy, many operations will close.
Source: The Cattle Site