FAS discussed trends on the milk market

On 20 May 2016, the Head of the Department of the Federal Antimonopoly Service (FAS Russia) for Control over Chemical Industry and Agro-Industrial Complex, Anna Mirochinenko, outlined several steps to improve the milk market in the Russian Federation speaking at the Round Table “Food Value Chains and BRICS Competition Law”, the IV Petersburg International Legal Forum.     

Currently the raw milk market in Russia is characterized by a low level of production concentration, geographical unevenness of production locations and high investment capacity. The market experiences seasonal changes in production volumes.

FAS representative states that “the market depends strongly on imported supplementary feeds, veterinary drugs, equipment and breeding cattle. One cannot leave unnoticed a low level of information support in the sector which lacks consolidated reliable information about livestock numbers, marketability and milk grades”.

Non-production factors car account for up to 30% of price: retail, intermediary services.

A relatively small number of companies are involved in production of high-technology dairy products. For instance, most of 900 raw milk processers focus on production of traditional dairy product with short storage periods. Only 70 of them produce long-storage milk. It reduced competition between producers in particular market segment significantly”, added Anna Mirochinenko.

She said that decreased consumer demand is observed in the market of milk and dairy products. As a result, the range of producers is changing towards cheaper product lines. In the future reduced demand may lead to a number of processing companies exiting the market and, as the consequences, increased economic concentration, deteriorated quality and more falsified products.

According to FAS, several measures should be undertaken to improve the conditions on the milk market.

Strengthening the farmers’ position in negotiations with processors will stimulate sales cooperation, establishing an alternative demand in “big milk” period through interventions.

It is also necessary to tighten control over economic concentration at the processor’s level and the authorities in the course of granting subsidies.