Named the negative consequences of excess production of dairy products in Russia

Cream from milk is removed not by buyers, but by retail chains

The way our economy works is that food prices go up even when it is obvious to everyone that they should go down. Take everyone’s favorite “milk”. On farms, a liter of raw milk has fallen in price by an average of 30% this year. And in trade, dairy products … rose in price by 50-70%. How can this be? This question is asked not only by ordinary consumers, but also by those in power. State Duma deputies in their letter ask the Federal Antimonopoly Service to check pricing in the dairy departments of retail chains. The inspectors have already gone on raids.

Angry parliamentarians tell anti-monopolists that in 2023 there was a sharp decrease in the purchase prices for raw milk. From 35 rubles per liter (under previously concluded contracts with dairies) to 28 and below. This is what the deputies write, although, according to MK, processors accept milk from farmers for 23 rubles.

Dairies themselves attribute low purchase prices to a drop in product consumption in 2022. Which, in turn, fell due to a decrease in household incomes, high inflation (almost 12%) and a simultaneous increase in consumer prices for dairy products in stores. All these factors together led to overstocking of warehouses, unsold stocks increased by an average of 38%. Butter lies without movement – an ordinary buyer can afford it only if a promotion is announced in the store, that is, a discount. Without it, a 200-gram briquette costs 250 rubles – for most it will be a little expensive!

The vaults are bursting at the seams with accumulations of skimmed milk powder and cheeses. How else? In 2022, domestic farmers milked 800,000 tons more milk than in 2021. And consumption, due to the reasons already mentioned, fell by 250 thousand tons. Here, it’s all overstocked, stuck in storage. In addition, we received almost 15% more dairy products from Belarus than previously planned.

A crisis of overproduction is sometimes worse than a shortage. The surest way to eliminate it is to lower prices on the shelves. However, in our realities, everything happened exactly the opposite. According to the authors of the letter to the Federal Antimonopoly Service, the margin on some dairy products in retail chains has risen by 40-70%, and for high-margin types – up to 100-150%.

As a result, prices for raw milk are falling, while for the consumer they are rising. Cream from our milk is removed by retail chains, but not by ordinary Russians.

The reverse side of the coin is that at such purchase prices for milk, it becomes unprofitable for small peasant farms to keep cows. Although it is private farms that have been supplying about 30% of milk to the market in recent years. If they slaughter cattle, which has already begun in some Russian regions, we will have to switch to powdered milk for a long time – since it is in abundance …

To unload warehouses from overstocking, a number of politicians are proposing to urgently introduce milk stamps for schoolchildren and the poor. This proposal has so far hung in the corridors of power, where for some reason they stubbornly refuse such measures to support the population. Although the idea is quite mature, because in recent years, milk consumption in Russia has been noticeably declining. In 2020, there were 240 liters per capita, in 2021 – 208, and last year – only 164 liters.

“In the current situation in the dairy industry, a combination of several state support tools is necessary to overcome difficulties,” says Marina Petrova, Deputy Chairman of the Moscow Chamber of Commerce and Industry Committee for the Development of Entrepreneurship in the Agro-Industrial Complex. – First of all, these are interventions that work well with a sharp decline in prices for exchange-traded products.

– The current situation with the skewed prices for “milk” is not the first, it has happened before …

– Yes, the fall in prices for raw and powdered milk, powdered whey is repeated in our country every three years. In this connection, it would be logical to increase the volume of public procurement for cheese and butter. Including for the needs of the Ministry of Defense, the Ministry of Emergency Situations and the Russian Guard. Of course, in a situation of continuing decline in real incomes of the population, it is important to return to the issue of providing high-quality dairy products to socially unprotected segments of the population, including with the help of food cards. In addition, the change in the diet of military personnel in the direction of daily provision with cheese, butter and milk powder remains relevant. I also consider it important to consider the possibility of launching the School Milk program, which would be aimed at increasing the intake of protein and easily digestible calcium.