November 5, 2003

 

 

Russian Federation Dairy and Products Review 2003; Milk Production To Rise 1% in 2004
 

Executive Summary

 

Raw milk production is forecast to rise by one percent in 2004 due to an increase in overall efficiency.  However, raw milk production decreased by three percent in 2003 because of a reduction in the number of milk cows due to short feed supplies. Cheese production and dry whole milk powder are forecast to remain steady in 2004, while nonfat dry milk (NFDM) is forecast to increase by four percent.  A key question mark leading into the winter of 2003/2004 is the supplies of feed and fodder.  Overall fodder stocks are lower in the fall of 2003 than in 2002, but gains in efficiency are expected to offset this decrease.  Feedstocks will be the key to slowing the consistent decline in the milk herd in recent years.  The number of milk cows is forecast to decrease by two percent in 2004, following a four percent decline in 2003.

 

Production

 

Raw milk production decreased by three percent in 2003 in comparison with 2002, but is forecast to rebound by one percent in 2004.  The number of milk cows is forecast to drop by two percent in 2004, after a four percent fall in 2003.  Short feed supplies caused the four percent reduction in the 2003 cow number.  Higher per cow milk productivity could not compensate for the milk cow reduction, which resulted in the total fluid milk decrease in 2003.  However, increasing yields in 2004 are expected to lead to an overall increase in fluid milk production, despite the loss in the dairy herd.  This trend is partly resulting from regional governments more active support for milk farms in 2003.  Most regions compensate for some raw milk production costs, from one to 2.5 rubles per liter of milk.

 

Nonfat dry milk production is forecast to also remain stable in 2004, after falling by eight percent in 2003. Data for the first half of 2003 also shows that processors may be trying to use raw milk more evenly throughout the year, thereby creating a more stable production cycle. 

 

Feed supply

 

Poor weather conditions in the summer of 2003 did not allow farmers to prepare sufficient stocks of hay and silage for the upcoming winter of 2003/2004.  Though many regions are reporting significant growth of feedstocks because of sufficient feed crops and appropriate harvesting conditions (relative to 2002/03), overall feedstocks are down and show reason for concern.  Additionally, farmers are improving cattle feed production systems and efficiencies, in many cases using French technology (white clover + ryegrass) on cultivated pastures, and paying more attention on quality of compound feed.

 

Cattle heard improvement

 

Moscow region is the center of government and private efforts at dairy cattle improvement.  There are 28 cattle pedigree stock farms and 48 pedigree stock reproducers in the region that work to improve efficiency.  Average annual milking productivity of each of the 200,000 cows in the region was 4,200 liters in 2001 and 4,500 liter per cow in 2002.  This is much higher than Russia's overall average and is a result of pilot project started in six years ago with cooperation from German specialists.

 

Consumption

 

Domestic consumption of fluid milk continues to fall, while industrial use of raw milk increases.  This trend may change in the coming years as many experts forecast that fluid milk consumption will start to compete with industrial usage.  High fluid milk retail prices, price increases for other food products (especially meat products), and low incomes will turn customers to the cheaper types and qualities of milk.

 

Trade

 

Trade is forecast to remain stable for most dairy products in 2004.  Butter is forecast to decrease by four percent, while cheese is forecast to increase by three percent.

 

Policy

 

New Pricing Policies Considered

 

Currently, about 42 percent of raw milk is still purchased by the State.  The "Law on purchases and supplies of agricultural products for the state needs" envisages prepayment for the product up to no less than 50 percent, including 25 percent after the contract has been signed. 

 

The Russian government is considering development of a law to regulate the process of price formation for milk throughout the entire chain from the farmer to the consumer, through the use of producer organizations.  Prime Minister Kasyanov recently complained that processors and sellers of agricultural products are transferring all the risks onto the primary producer and that the GOR is going to fight against this.  He noted that the entire chain should be clearly regulated so that producers do not find themselves under pressure from external subjective factors. 

 

Moreover, Deputy Prime Minister and Agriculture Minister Aleksey Gordeyev said that such power should be given to self-regulating organizations.  These organizations would forecast prices for the calendar year and market participants will use them as guidelines.  It will make it possible to regulate local monopolies in the agricultural sector, as well as relations between producers and suppliers of agricultural commodities and processors.  Though details are currently sketchy, Russian policy makers are examining the milk policies of other countries in order to develop a new domestic pricing strategy.

 

Quality requirements

 

A new standard on milk quality will be introduced beginning January 1, 2004.  The new standard is significantly stricter than the old one.  Total bacterial content should be not more than 50,000 in one cubic centimeter (versus 300,000 in the previous standard).  New characteristics were added to new standards such as the content of somatic cells, chilling temperature (4¡À2 degrees Centigrade), the thermal stability of milk, and the cooling of milk (not later than 20 minutes after milking).  Though these requirements are stricter, experts believe that most farmers will not be able to comply with these requirements.  Additionally, beginning January 1, 2004 it will be a mandatory labeling requirement to indicate on the label if the milk or any other dairy product was produced from dry milk.

 

Foreign Investment

 

Foreign companies began more actively participating in Russian livestock improvement in 2003.  One notable project is that Sweden is cooperating with raw milk producing farms in North-West of Russia. According to the agreement, milk farms will be renovated so that the local dairy will manage to cover all its needs in raw milk. 

 

A group of Nizhniy Novgorod farms created a Russian - anadian Joint venture "Semex - Russia," which is now also experiencing positive results.  Twenty-two dairy cattle pedigree farms from five regions of the oblast participated in a show where young cattle and highly productive cows were exhibited and the five-year cooperation between Russian framers and Semex Company exhibited excellent results.  Canada provided semen through "Semex-Russia" and financed training of workers for cattle artificial insemination.  Two hundred specialists were trained as a result.

 

 

Source: USDA