In 2008 and 2009, exports of dairy products exceeded $1bn in value. “We export more milk than tractors!” notes the Head of the Strategy Analytical Centre, Leonid Zaiko. “It’s logical, since a litre of milk sold to our major sales market of Russia costs the same as a litre of petrol.” According to the UN Food and Agriculture Organisation, Russia is the largest importer of dairy products in the world; simultaneously, it is the largest buyer of Belarusian milk. Despite a summer ‘milk conflict’, last year, over 80 percent of sales targeted the Russian market. The Director of the Belarusian National Academy of Sciences’ Institute of System Research in the Agrarian-Industrial Complex, Valery Belsky, explains that falling numbers of milk livestock in Russia and Ukraine have benefitted Belarusian farms. “In early 2009, farmers in neighbouring states sent their cows to slaughter, due to falling sales prices. In autumn, when the milk glut ended, it became clear that Russia and Ukraine were short of milk. As a result, prices for all dairy products rose drastically. In Belarus, livestock is state regulated and this ‘conservatism’ has yielded fruit. We’ve saved our production volumes and generated profit on exports.”
In May 2009, stock exchange quotations for skimmed milk powder reached $1.5 per kilo (prime cost was $1.80). However, in November, it sold for $4 — due to the deficit in Russia. This zigzagging within the market enabled Belarusian exporters to recoup their losses from the first six months of the year; they even generated profit.
The stock exchange price for cheese also rose — from $3.20 per kilo in May 2009 to $5.40 in February 2010. According to the Agriculture and Food Minister, Semen Shapiro, cheeses are the most profitable dairy products. In April, President Lukashenko visited Luban Cheese-Making Plant, ordering its management to quickly redistribute milk and funds towards cheese production. The company’s experience shows that investments into new cheese-making lines quickly pay for themselves, within just 2-3 years.
Last year, Belarus joined the top cheese exporters. The Institute of System Research in the Agrarian-Industrial Complex has used UN Food and Agriculture Organisation data to calculate that Belarus accounts for 6.8 percent of global cheese sales. Belarus has even greater standing in global butter exports, accounting for 10.8 percent. “Butter is produced by most countries for domestic use rather than export,” explains Mr. Shapiro. “However, last year’s deficit of butter in Russia and Ukraine enabled us to increase exports and become a global leader in the branch.”
In addition to cheese and butter, Belarus also sells large volumes of skimmed milk powder (6.7 percent of global exports). Moreover, we boast the largest geography of sales, exporting to Bangladesh, Egypt, Lebanon, Oman, Pakistan, Singapore, Sudan, Syria, the UAE, Saudi Arabia, Mongolia, Mauritania, Senegal and, even, New Zealand (a leading producer of dairy products) last year. The geography of sales of whole milk products is narrower, with Russia and Ukraine being the major markets. Whole milk is not yet supplied to the European Union, as Belarusian and European standards differ. On January 1st, 2011, a technical regulation on ‘Milk and Milk Products: Security’ comes into law, enforcing Russian and EU technical regulations.
The Head of the State Food Inspection for Quality and Standardisation at the Ministry for Agriculture and Food, Sergey Lozhechnik, notes that the shift to new standards will require much investment. “In particular, we need to buy additional refrigerators to transport milking machines, as the new regulation stipulates that milk for processing must be kept at a temperature not exceeding 10 degrees.” Money is also needed to purchase new laboratory equipment and re-train specialists. Mr. Lozhechnik is convinced that these expenses are well justified, “Meeting EU requirements will allow our companies to supply their products to the EU without technical barriers, creating future sales.”
Mr. Belsky views the situation differently, since meeting EU quality requirements does not guarantee exports to Europe. Last year, dairy products supplied to the EU were charged a minimum fee of 1,300-1,800 euros per tonne, which Mr. Belsky views as a prohibitive barrier. “Nevertheless, it’s worth struggling for the right to supply our goods to the EU,” notes one major Belarusian dairy. “At the very least, we receive a European number, giving us advantages on our existing markets.”
“This is wise,” agrees Mr. Belsky. “Moreover, if Belarus comes to share a free trade zone with the EU — as strategically outlined by the Eastern Partnership — such fees will be removed. This is why plants striving for European attestation are acting far-sightedly.” Belarus’ dairy industry is planning to increase its sales in coming years, gaining access to promising new markets.
By Vitaly Volyanyuk
