Russia to fully subsidise logistics costs for dairy

From 1 January 2024, the Russian government will subsidise 100% of the logistics costs of the export of several categories of dairy products, including cheese, butter and dry whey, according to a new decree signed by Russian prime minister Alexey Mishustin. Over the past few years, the Russian budget reimbursed 25% of logistics costs to dairy exporters.

The Russian union of dairy producers, Soyuzmoloko, explained that the higher subsidy technically had already become operational. In the first quarter of 2024, Russian dairy companies could seek total compensation for costs associated with delivering goods to foreign customers this year.

Removing the pressure

The Russian Agricultural Ministry explained that the hike in logistics subsidies was needed due to large stocks of dairy products with long-shelf life accumulated at warehouses of Russian milk processors over the past several months. The higher subsidy should remove the surplus from the domestic market and prevent a price slump.

In 2023, the Russian government expected to spend 11 billion roubles (US$120 million) on payments of logistics subsidies for dairy exporters.

Russian news outlet Dairy News reported, citing local market players, that the hike in export subsidy is expected to dramatically improve the competitiveness of Russian dairy products on the global market.

Anatoly Losev, general director of the dairy manufacturer GK Molvest, said Russian business could ramp up deliveries to the market of the Middle East and Asia, though, he warned, logistics remain complicated, so it would take time for the higher subsidy to bring visible results.

Over the past couple of years, logistics costs skyrocketed for Russian companies, so the new measure is welcomed, according to Igor Moskovtsev, general director of another Russian dairy manufacturer, CJSC Korenovskiy Milk Canning Plant.

On the other hand, Sergey Kovalkov, commercial director of the Russian food company Prodinvest, expressed doubts that the higher logistics subsidy would help Russian dairy companies gain a foothold in new markets. He explained that there is a lack of new markets where supplies could be launched.

Kazakhstan

In the meantime, Dairy News also reported that export subsidies could bring some problems for the Kazakhstan dairy market. Some local operations raised concerns that by having logistics costs fully subsidised, Russian dairy giants could have the upper hand in competition in the Kazakh market.

Some sources quoted by the publication, however, argued that Kazakhstan dairy companies could benefit from the new measure due to a rise in supplies of some crucial raw materials, namely milk whey.