Maxim Fasteev: Inflation of raw materials and exchange-traded dairy products is the main trend of the global dairy market in 2021

Источник: The DairyNews
Maxim Fasteev, a leading analyst at Infagro, told The DairyNews about the changes that took place on the stock exchange in the outgoing year, what trends determined the development of the market, how 2021 differs from the previous year.

‘Like 2020, the outgoing year was marked by a global pandemic and its impact on all aspects of life,’ he said. ‘However, inflation of raw materials and exchange-traded dairy products caused by the disproportion of supply and demand can be considered the main trend for the global dairy market in 2021.

In his opinion, if last season exporters could cover the increased demand for dairy products, in the outgoing year, due to the deterioration of profitability and the negative impact of weather conditions, the production of raw milk in key regions either did not show the previous increase, or began to decline. Due to this imbalance, there was a rapid increase in the cost of raw milk and dairy stock positions worldwide in the second half of the year.

According to the leading analyst, in 2021, the Russian market demonstrated trends corresponding to global dynamics: the increase in the cost of raw milk production reduced the attractiveness of new investment projects, and unfavorable weather in summer complicated the harvesting of forages for the new season. As a result, the increase in milk production by agricultural organizations, which has been characteristic of the market for the last 4-5 years, has practically disappeared. According to the results of the calendar year, the figures for the production of commercial milk will be close to the indicators of 2020.

When asked how the volume of milk processing has changed this year in Ukraine and what state its dairy industry is in, the expert quoted from the speech of commodity producers: ‘Milk processing volumes in Ukraine are expected to decrease in 2020 due to the fact that agricultural enterprises could not block the natural drop in the supply of raw materials in the population category. Global feed inflation has also affected Ukrainian producers – operators have worsened productivity, although they were able to keep livestock at a stable level for the first time in many years.’

‘In my opinion, in general, the dairy industry of Ukraine has stagnated in recent years as a result of the following reasons: bet on crop production, the lack of external investment, the factor of the land market and others,’ Fasteev expressed his opinion. ‘Due to the growth of consumer demand and a decrease in the supply of raw materials from the population category, Ukraine has become balanced in recent years from an export-oriented dairy country – the volume of exports in the equivalent of raw milk is equal to the volume of imports. In monetary terms, the balance of 2021 will be in deficit. At the moment, exports are focused on the CIS, MENA, and China markets. Import – the EU and Belarus.

The leading analyst said that among the key positions of Russian exports are ice cream, whey powder, milk-containing items such as spreads and condensed milk with vegetable fats.

Ukraine currently exports all types of goods with a bias towards protein: cheese product, milk powder and whey powder, casein and other items.

Among the key consumer trends for the Russian and Ukrainian markets in recent years, the expert highlighted a common one - an increase in the consumption of fresh cheeses and cottage cheese group.

As for trends in Russia, Ukraine and the world in the new year, the leading analyst predicts the following scenario:

‘Next year brings a lot of uncertainties - the continuation of the pandemic with its new turns, inflation, which has not yet fully reached the shelf, global climate change, making agriculture more volatile in terms of pricing. And, unfortunately, the current geopolitical risks that loomed over the region before the New Year.

He added that in the "sterile" forecast, without a component of weather and geopolitical risk, he sees a good margin of milk producers, both in Russia and in Ukraine. Regarding processing, it will definitely be difficult due to further shelf inflation, so operators should prepare for changes in the market: high chances for bankruptcies, consolidation, acquisitions and mergers. Such a trend may be characteristic of the entire global market, especially if China reduces its import volumes in 2022.

‘In the New Year, I wish all dairy farmers, regardless of their status and place in the dairy chain, to be as efficient and productive as possible — this is the only right way for those who want to stay on the market "for a long time," the expert concluded.

Крупнейшее независимое мероприятие молочного рынка в мире стартует 22 мая в городе Алматы, Казахстан. Более 300 гостей, 73 спикера деловой программы, актуальные темы рынка производства и переработки молока - все это Молочная Олимпиада.
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