Russia's dairy industry may face raw material shortages amid rising consumption

"For the first time in a long time, milk consumption is significantly outpacing supply growth," said Artem Belov. "During the first half of 2024, dairy consumption increased by 6%, while the supply of commercial milk grew by only 2.5%." According to him, commercial milk production during this period amounted to 13.2 million tons against 12.9 million tons a year earlier.

The expert emphasized that the shortage of raw materials may worsen in the coming years, especially given the export-oriented projects in the industry. "The production of dairy raw materials will become a key priority for the next 2-4 years. Investors and government support should focus on increasing supply," said Artem Belov.

The increase in production costs also affects the market. According to Belov, over the past year, the costs of processing dairy products have increased by 14-18%, which reduces the profitability of the industry. In particular, since August, there has been a sharp increase in the cost of producing raw milk. In September of this year, the cost of milk increased by 15% compared to the same period last year.

Butter prices are showing particularly noticeable growth. In August 2024, the cost of butter increased by 17.4% year-on-year, and by 6.2% since the beginning of the year. According to Rosstat, since the beginning of the year, butter has risen in price by 14.9%, and prices for other dairy products, such as sour cream, milk and cheeses, also continue to rise.

Despite the price increase, Belov noted that demand for dairy products remains high due to the increase in disposable income of the population. "The potential demand for milk and dairy products is at a good level, which supports the industry," he concluded.