Belarusian Dairy Industry Faces Sharp Profit Decline Amid Economic Challenges
Source: The DairyNews
The Belarusian dairy sector experienced a significant downturn in 2023, with net profitability plunging by 85% to BRR 144 million (US$27.2 million), according to local analyst Felix Mirskiy. The industry, which includes two dozen dairy factories, faced heightened financial struggles as nine of these factories reported losses, a stark contrast to the previous year when all were profitable.
Notably, Savushkin Product, a leading manufacturer, saw its net profit drop from BRR 393.8 million (US$118.9 million) in 2022 to just BRR 187.5 million (US$56.6 million) in 2023. The Slutsk cheese-making plant also shifted from a profit of BRR 140 million (US$42.2 million) to a loss of BRR 25 million (US$7.5 million). Meanwhile, Minsk Dairy Plant was the only entity to record a profit increase, though the margin was minor at BRR 500,000 (US$151,000), which Mirskiy described as negligible in the broader industry context.
Despite these financial hardships, the industry did report a 6.2% increase in milk production, totaling 8.14 million tonnes in 2023. Belarus, which exports about 60% of its dairy products, saw an uptick in international sales and projects further growth with a goal to boost milk production to 8.7 million tonnes in 2024.
The dairy sector's decline is attributed to several factors impacting the broader Belarusian economy, including reduced income from exports to Russia due to the weakening Russian ruble, which led to decreased sales revenue without a corresponding drop in costs. Additionally, the industry faces increasing operational costs due to a labor shortage, necessitating higher wages to retain staff despite falling profits.
A critical challenge highlighted by Mirskiy is the government-imposed price caps that prevent producers from raising prices to cover increasing costs. This regulatory environment has pushed the profitability of retail trade nearly to zero, with the dairy industry likely to follow unless there are changes in government policy.
Despite these financial hardships, the industry did report a 6.2% increase in milk production, totaling 8.14 million tonnes in 2023. Belarus, which exports about 60% of its dairy products, saw an uptick in international sales and projects further growth with a goal to boost milk production to 8.7 million tonnes in 2024.
The dairy sector's decline is attributed to several factors impacting the broader Belarusian economy, including reduced income from exports to Russia due to the weakening Russian ruble, which led to decreased sales revenue without a corresponding drop in costs. Additionally, the industry faces increasing operational costs due to a labor shortage, necessitating higher wages to retain staff despite falling profits.
A critical challenge highlighted by Mirskiy is the government-imposed price caps that prevent producers from raising prices to cover increasing costs. This regulatory environment has pushed the profitability of retail trade nearly to zero, with the dairy industry likely to follow unless there are changes in government policy.
