In W45 in the dairy landscape, the National Union of Milk Producers foresees positive dynamics in Russia's dairy product exports for 2024. Projections indicate that Russia's skimmed milk powder exports will range from 12 to 14 thousand metric tons (mt), while whey shipments are expected to exceed 20 thousand mt by the end of 2023. Exchange goods, primarily skimmed milk powder and whey, constitute a substantial 80% market share of Russia's dairy exports. Key markets include Algeria, Egypt, the United Arab Emirates (UAE), and Saudi Arabia. Ongoing negotiations for supplies to Oman and exploration of Southeast Asian markets, particularly China, Malaysia, Indonesia, the Philippines, and Vietnam, suggest potential growth in Russia's dairy exports.
Russia experienced a 4.5% increase in the operating cost of raw milk production (RMCI) in Sep-23 compared to Aug-23. This was marked by notable price hikes for key components, including a 3% month-on-month (MoM) increase in cattle feed, vegetable meal, and cakes. Additionally, there were 1% MoM hikes in feed grain and electricity costs, while diesel fuel saw a substantial 18% MoM surge. The acceleration in the depreciation of the ruble and heightened inflation rates, contributed to this RMCI escalation. The average cost of maintaining dairy cattle increased by 13% year-on-year (YoY), with labor resources rising by 13% YoY, cakes and meals by 26% YoY, electricity tariffs by 11% YoY, and fuel costs by 22% YoY. Concurrently, the bi-currency basket's foreign exchange expenses skyrocketed by 67% YoY. Despite a 5.8% RMCI increase in Aug-23, the Sep-23 rise was attributed to a more significant uptick in labor costs. From early 2017 to Sep-23, dairy production costs surged by 60.4%, outpacing the 12% increase in average comparable purchase prices for raw milk. According to Rosstat, dairy product prices averaged USD 0.32 per kilogram (kg) in Sep-23, a 1.1% MoM increase but an 11.9% YoY drop. Experts highlighted that the growth in costs is presently surpassing the recovery rate of purchase prices.
The Ukrainian dairy industry sees potential in aligning with Europe's 2050 sustainability goal of becoming a carbon dioxide (CO2)-neutral continent. There's an opportunity for Ukrainian dairy farmers to invest in renewable energy, enhancing efficiency in the average milk production per cow, which stood at 6,210 kg in 2022. Despite some farms operating with outdated equipment, there is potential for growth both in improving cattle density, currently at 4.2 cows per square kilometer (km²) in Ukraine, and increasing the overall number of cows. The industry could address concerns about the projected decline in European milk production, positioning Ukraine to fill the gap. However, the ongoing Russia-Ukraine war needs a resolution. Regarding land opportunities, recent laws have opened the market for Ukrainian citizens and companies, though restrictions on foreign investment persist.
Bulgaria's cow milk production reached 843.03 thousand liters as of Nov-23, a decline of 9% YoY due to a reduction in dairy animal herds. Despite this, cow's milk processing increased by 6.4% in the first eight months of 2023, reaching 467.15 thousand liters. Despite the domestic production decrease, the country experienced a 27.5% YoY rise in cow milk imports, totaling 25.6 thousand mt from Jan-23 to Jul-23. Non-concentrated cow milk and cream imports rose by 54.4% YoY, totaling 60.4 thousand mt over the period. The export of Bulgarian cow milk products, especially cheeses, is primarily destined for Greece (31.5%), followed by Romania (16%) and Germany (8.5%). Notably, whey exports increased by 68.2% from Jan-23 to Jul-23 compared to the same period in 2022.
Lastly, Argentina’s dairy industry is grappling with a prolonged production cycle, leading to the closure of numerous farms, and affecting both producers and domestic businesses. The extended time frame to rebuild dairy farms exacerbates the challenges. Delayed payments, inflation, and rising production costs, especially for feed in dollars, further burden farmers. Government measures aimed at bolstering foreign currency inflows inadvertently inflate input costs. Forced closures result in the sale of valuable dairy cows and a loss of genetic potential for efficiency. However, transferring increased costs to consumers is not feasible due to market dynamics. Dairy farmers face a perishable product dilemma, with limited storage options, leading to scenarios like mass disposal.
