According to the Russian Federal State Statistics Service (Rosstat), in January–November 2018, production of milk (raw milk excluded) in Russia grew by 2.7% compared with the similar period of 2017. Butter output declined by 4%, whereas production of cheese increased by 2.8%.
Based on the indicators for the first 11 months of 2018, one may expect dairy output in the Russian Federation to remain virtually unchanged compared with the indicators for 2017. On the one hand, this speaks for a mature market; on the other hand, this suggests that the market is still recovering from the crisis and counter-sanctions.
At the same time, imports and exports of dairy products have been dropping due to imports being partly covered by domestic production. Supplies of virtually all types of dairy products from Belarus have been on the decrease, said country being the main dairy exporter into Russia; supplies to countries of the CIS have been decreasing as well. At the same time, even against the declining supplies from the Russian Federation, imports are several times higher than exports in monetary terms.
In 2016–2017, exports were gradually recovering after a significant drop in 2015 which concerned all types of dairy products except milk and cream. This was happening under the influence of import substitution when the ban on import was compensated for by growing domestic output. In January–October 2018, exports fell across all dairy product categories as a result of decreased supplies to the key importing countries.
Changes in the structure of exports have been occurring.
Stable growth in the structural share of exports in value terms has been demonstrated by cheeses and quark through declining shares of butter, milk and condensed cream. Compared with 2017, in January–October 2018 the structural share of yogurts increased by 1.6 pp despite the drop in yogurt export volumes; exports of yogurt in physical terms dropped from 51.8 thousand tonnes in January–October 2017 to 48.5 thousand tonnes in the similar period of 2018. This is largely due to changes in the structure of the dairy market as a whole under the influence of shifting consumer preferences.
Having analyzed exports in monetary terms, one can make the following conclusions.
In January–October 2018, the bulk of exports in monetary terms in the category of milk and cream fell on products with the fat content of more than 1% but less than 6% (68.7%; 75.9% in 2017) as well as products with the fat content of more than 10% (19.3%; 13.8% in 2017). The following countries were the largest importers of milk and cream: Ukraine (46.1% against 45.5% in 2017), Kazakhstan (29.7% against 31.7% in 2017), Abkhazia (5.6% against 6.6% in 2017), and Kyrgyzstan (5.6% against 1.9% in 2017). Belarus had its share reduced from 6.7% in 2017 to 2.8% in January–October 2018.
The structure of condensed cream and milk exports in January–October 2018 was as follows:
* condensed milk and cream with the fat content of up to 1.5%, 8.3% (12.8% in 2017);
* condensed milk and cream with the fat content of more than 1.5%, 7.2% (6.8% in 2017);
* other milk and cream varieties with the fat content of more than 1.5%, 0.6% (0.5% in 2017);
* condensed milk and cream without added sugar with different fat content, 4% (23.3% in 2017);
* other condensed milk and cream with added sugar, 80% (56.6% in 2017).
Condensed milk and cream were mainly supplied to Kazakhstan (58.1%; 66.8% in 2017), Ukraine (11.9%; 13.4% in 2017), and Belarus (8.3%; 6% in 2017).
Within the category of yogurt, kefir and other fermented products, exports were distributed as follows: yogurts, 19.5% (20.5% in 2017); other dairy products, flavored and non-flavored, with and without added sugar, with and without added fruit, nuts or cocoa, 80.5% (20.5% in 2017). The main countries importing products within the aforementioned category are Kazakhstan (29% against 33.7% in 2017); Belarus (11.4% against 15.5% in 2017); Azerbaijan (10.7% against 8.2% in 2017), and Ukraine (9.4% against 8.7% in 2017).
In the category of whey, the bulk of supplies fell on condensed and non-condensed whey with and without added sugar (56.5%; 65.7% in 2017). The share of other dairy products with and without sugar or other sweeteners in exports amounted to 43.5% (34.3% in 2017). The Russian Federation was mainly supplying whey to Kazakhstan (36.2%; 45.5% in 2017); Belarus (34.2%; 10.1% in 2017), and Ukraine (12%; 33.3% in 2017).
In the category of butter, in January–October 2018, the largest volumes fell on natural butter (79.6%; 78% in 2017), whereas dairy spreads and other diary fats occupied 16.1% (14.1% in 2017) and 4.3% (4.3% in 2017) of supplies respectively. The main importers within the category include Ukraine (40.4% against 37.1% in 2017), and Kazakhstan (39.4% against 49.2% in 2017).
In the “cheese and quark” category, the largest shares of exports fell on non-grated and non-powdered processed cheeses (44.5%; 42,9% in 2017), and on fresh (green and unripened) cheeses and quark (40.5%; 39.1% in 2017). The leaders in supplies of said products were Kazakhstan (46.5%; 49.2% in 2017); Belarus (17%; 15.2% in 2017), and Ukraine (14.7%; 12.5% in 2017).
All in all, one can conclude that the structure of Russian dairy exports is fairly stable and is not undergoing any serious shifts in terms of both product ranges and importing countries. A drop in exports to the similar period of 2017 occurred across all countries mentioned above. However, clearer conclusions regarding the situation can only be made by based on data for 2018 as a whole.
Imports decreased across all dairy product categories with the exception of yogurt, kefir and other fermented products, which, as has been indicated above, was due to changes in consumer preferences in the dairy market (demand shifting towards modern and functional dairy). In 2018, a sharp drop in imports was observed in the category of condensed milk and cream as well as whey. This was caused by supplies from Belarus having got almost 2 times lower, which was connected with restrictions imposed by the Russian Ministry of Agriculture due to issues involving products not meeting the safety standards.
The structure of imports underwent changes in both monetary and physical terms.
During the time period analyzed, cheeses had their share increased significantly (demand has been gradually recovering, although according to a large number of consumers, there are currently no decent substitutes of certain imported cheeses in Russia), which led to a decrease in the shares of other product varieties except yogurts mentioned above.
A comparison of export and import structures reveals that Russia’s strongest positions in exports fall on yogurts, kefir and other fermented products, as well as cheese and quark, whereas the bulk of imports fall on cheese, quark, and butter.
Having analyzed the structure of imports in monetary terms, one can make the following conclusions.
In the “milk and cream” category, in January–October 2018, the bulk of supplies in value terms fell on condensed milk and cream with the fat content of more than 1% but less than 6% (63.2%; 57.7% in 2017) and milk and cream with the fat content of more than 10% (33.7%; 38.8% in 2017). Belarus served as the largest supplier of these products, having accounted for the share of 91.8% in imports (93.3% in 2017). Imports from Belarus fell by 26% compared with the similar period of 2017.
The bulk of condensed milk and cream imports fell on products with the fat content of up to 1.5% (55.5% against 54.3% in 2017), whereas the share of products with the fat content of more than 1.5% equaled 26.8% (29.6% in 2017). The main countries exporting condensed milk and cream are Belarus (79.9% against 73.4% in 2017), and Uruguay (6.5% against 7.4% in 2017). Imports from Belarus dropped by 44.6% in monetary terms.
Within the category of yogurt, kefir and other fermented products, in January–October 2017, yogurts occupied 20.5% of imports (14.4% in 2017). Other dairy products, flavored and non-flavored, with and without added sugar, with and without added fruit, nuts or cocoa accounted for 79.5% of imports (85.6% in 2017). Belarus was the largest exporter in the category (95.9%; 95.9% in 2017), its supplies in monetary terms having increased by 8.7%.
In the category of whey, the bulk of supplies fell on condensed and non-condensed whey with and without added sugar (86.9%; 86.6% in 2017) as well as other dairy products with or without added sugar and other sweeteners (13.1% in imports; 13.4% in 2017). The largest volumes of whey supplied to Russia were imported from Belarus (59.8% against 75.9% in 2017), and Argentina (32.6% against 13% in 2017). Supplies from Belarus plummeted in half to the similar period of 2017, whereas imports from Argentina increased by 20% in monetary terms.
In the category of butter, the main volume of imports fell on natural butter (87.1%; 89.9% in 2017). Dairy spreads amounted to 3.2% of supplies (1.7% in 2017), whereas other dairy fat varieties had the share of 9.7% (8.3% in 2017). The leading suppliers of goods within the category were Belarus (73.2% against 72.2% in 2017), and New Zealand (11.2% against 18% in 2017). Supplies from Belarus declined by 32%, whereas supplies from New Zealand dropped by 57%.
In the “cheese and quark” category, the largest shares belonged to fresh (green and unripened) cheeses and quark (22.6% against 15.9% in 2017), and other cheeses (74.4% against 42.9% in 2017). Other shares were occupied by grated and powdered cheeses of all varieties, non-grated and non-powdered processed cheeses, as well as blue and other cheeses produced with the use of penicillium roqueforti. Said products were mainly exported from Belarus (78.8%; 82.7% in 2017); Argentina (6.2%; 4.7% in 2017), and Serbia (4.6%; 3.6% in 2017). Compared with January–October 2017, supplies from Belarus demonstrated a 7.3% decrease, whereas supplies from Argentina and Serbia grew by 51 and 30% respectively.
The bulk of dairy exports from Russia are supplied to countries of the former Soviet Union, whereas imports are mainly supplied from Belarus (its share has been on the decline, however). Other countries have small shares in the structure of imports and exports due to sanctions and restrictions.
An analysis of average consumer prices indicates that during the time period in question (13 months) prices increased within 2–5% across the main dairy categories.
The situation with consumer prices reflects the state of things in average producer prices, which rose within the same range. In hard cheeses, a sharp reduction occurred in early 2018, when prices dropped 31%, although it did not affect consumer prices significantly: the price has been growing at a stable rate. In pasteurized milk, prices fell by 1.5% in both the second and third quarters 2018.
Changes in prices for milk are associated with fluctuations in producer prices for cow’s milk in the respective quarters of 2018.
In summing up the preliminary results for 2018, one can state that the Russian dairy market is rather stable despite declining exports and imports. The changes taking place primarily concern consumer behavior, which affects domestic production and foreign trade of dairy products.