The Russian Agricultural Ministry has preliminarily approved subsidies of 10 billion roubles ($150 million) on cattle feed in 2022 in a bid to support the dairy industry and constrain prices on the domestic food market.
During a government meeting on February 8, the Russian Agricultural Minister Dmitry Patrushev said the subsidies are called to tackle food inflation. The Ministry raises concerns over a sharp rise in prices for bread, sugar, milk, and vegetables.
Several Russian major dairy producers notified retailers about the upcoming rise in prices. For example, Danone rolled out plans to raise prices by 10% on several product items.
Several Russian dairy producers complained about the rising feed prices in 2021. Andrey Nanochkin, deputy director of Pokrovsky Concern, said that the price for cattle feed and feed additives last year jumped by 20% to 50% depending on the certain product. Nanochkin added that in order to cut production costs, some milk farmers had to adjust cattle diets, replacing some components with cheaper alternatives.
On the other hand, Nanochkin added, the rise in price for raw milk in Russia last year lagged behind the production cost hike. On average, the production cost increased by 17%, while the raw milk price climbed by only 6% to 8%. In this background, quite a few milk farmers saw their profits collapsing almost to zero, he admitted.
The 10-billion subsidy approved by the government is expected to improve the operational conditions for some milk farmers, but not drastically, said Yuri Ivanov, director of the All-Russian Scientific and Research Institute of Livestock Industry Mechanization said during a conference in Moscow.
In the current market conditions, some Russian milk farmers tend to switch to growing grain, Ivanov said, suggesting that the government must closely look into this issue.
“Cattle population in Russia is unevenly shrinking. In the farms with the cattle population above 800 heads, we see evidence of an increase in the number of cattle,” Ivanov said, adding that this is basically in line with the global trends. “For small farms with a cattle population between 40 and 100 heads, it is difficult to survive,” he added.
In 2021, Russia produced 2.6 million tonnes of cattle feed, compared to 2.45 million tonnes in the previous year, the Russian State Statistical Service Rosstat estimated.
Rosstat estimated that the average price of cattle feed in Russia reached 19,402 roubles ($235) per tonne, 8.9% up on year-to-year comparison. Most Russian milk producers believe that the price hike was way stronger.