Russia’s dairy industry adjusts to embargo

Published 25 October 17

Following Russia’s 2014 import ban on agricultural products from certain countries, Russia’s net imports of dairy products fell 29% in 2016 compared to pre-ban levels, with the largest drop seen in cheese & curd. The ban wiped out over 230,000 tonnes of imports, equivalent to 53% of the volumes previously imported. 

2017.10.26. russia net imports

Domestic producers have benefited from the import ban, ramping up production in the absence of competitors. Cheese & curd production rose by 150,000 tonnes in 2016 compared to 2013, an increase of 21%. Butter, SMP and WMP production also grew – by 12%, 9% and 2% respectively. 

2017.10.26. russia production

However, consumption of dairy products has dropped since the ban, likely as a result of the rise in prices. Cheese & curd consumption has seen the largest drop, with consumption down 7% in 2016 compared to 2013. Butter consumption fell by 3%, with liquid milk down 10%. SMP and WMP consumption increased by 2% and 7% respectively.

While the Russian dairy industry has grown on the back of the embargo, it has not managed to completely replace import volumes as it continues to face a variety of challenges. Weaknesses such as a geographical imbalance of processing capacity, the requirement to transport milk across vast distances, the weak ruble and a squeeze on consumers’ purchasing power have limited production growth.

However, the Russian government is incentivising productivity and investment with targeted subsidies, investment credits and loans in order to support further growth. Foreign investors are also showing interest in accessing the undersupplied Russian market, with large investments from Chinese, Thai and Vietnamese companies in recent years.