COUNTRY REPORT ▶▶▶
The Vietnamese TH Group has started to invest in the Moscow region and builds production locations with the aim of pro- ducing 234,000 tonnes of milk per year. The Asian company also wants to start projects in the eastern part of Russia.
Economic and political uncertainties Despite the large investments of domestic and foreign com- panies, the dairy herd and production is growing less rapidly than the government had in mind. Meeuwes Brouwer, agricul- tural attaché at the Dutch embassy in Moscow, also sees this. “The dairy sector in Russia is developing itself, but in sectors such as poultry and pig things are going much faster.” Accord- ing to Mr Brouwer, investments in dairy cattle require more capital and more expertise. The problem is a weak starting po- sition when you look at the country. For example, efficiency and logistics are weak points of the Russian economy and ag- ricultural sector, and this is therefore also reflected in dairy farming. The immense distances have a direct cost-increasing effect and increase risks in production. “And for dairy farming there is a lack of knowledge and a good dairy infrastructure,” Mr Brouwer explains. He notes that foreign companies are re- luctant to invest heavily in Russia due to economic and politi- cal uncertainties. In addition, small and medium-sized farms are often forced to close their doors due to low returns. Due to the higher production and import of dairy, the milk price for standard milk has dropped. A big concern is the import via
32 ▶DAIRY GLOBAL | Volume 6, No. 2, 2019
Belarus, which creates additional pressure on the market and unfair competition with Russian producers. Also not all new projects are completed. Some of the new projects are unsuc- cessful, due to too many uncertainties and financing problems amongst other things.
Interesting markets The question remains to what extent the Russian dairy indus- try will play a role in the international dairy market in the long term. For strategic reasons, the Russian government wants a wider range of revenues besides oil and gas and agri- cultural products can certainly play a role in this. “With the development of dairy farming in the Eastern part of the coun- try, China and other interesting markets come into the pic- ture and this can be interesting for Russia,” says Mr Kremers. He certainly thinks it is possible that Russia will cut off dairy flows from Oceania in the future. However, the chance that this will happen within a few years is small. This requires a strong dairy infrastructure that can compete with other dairy countries for quality and cost. There is absolutely no question of that at this moment. And what will happen to the dairy in- dustry if the government withdraws as being the financial driver of the agricultural sector? Moreover, the country is sen- sitive to political and economic instability, and this is a vul- nerable situation to be in in the current world of international tension and uncertainties.
PHOTO: HENK RISWICK
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