Russia urged to tackle dairy logistics issues

In addition, Manitskaya suggested the authorities embark on a programme aimed at supporting private companies intending to invest in maritime transport.

Russian dairy exports are declining for the second consecutive year, as logistics costs on delivery goods to foreign customers skyrocketed due to Western sanctions.

“In 2022, exports ceased to grow. This year there has been an even greater decline, though in some groups a rise in deliveries is seen. Ice-cream exports halved last year. Judging from the results of the first half of 2023, the deliveries dropped by another 21%,” Manitskaya said.

The meteoric rise in costs

There are several reasons behind this – one is multiple increases in the cost of freight and port fees, Manitskaya said, adding that a weakening of the Russian currency also plays a role.

“Russia’s ruble exchange rate fluctuations don’t allow prices to be kept at the pre-agreed level since the cost of transportation is calculated in dollars. You have to recalculate [prices] at the current exchange rate on the day of shipment,” Manitskaya said.

The Russian ruble has weakened by 26% this year as a result of a collapse in export revenues and growing budget spending, making it the third worst-performing global currency this year. Over the past 12 months, the Russian ruble lost nearly half its value against the hard currency.

“The freight cost to the port of Abidjan [Cote d’Ivoire, Africa] has quadrupled. There are no alternative routes [for deliveries to the region]. In Southeast Asia, in particular in Shanghai, there are [available] logistics operators – shipping routes have been launched from St. Petersburg; there is a direct Russian Railway train, but the cost of delivery, despite this, has also increased,” Manitskaya estimated.

In 2022, several global shipping companies suspended logistics to Russian ports. In addition, The EU’s fifth package of sanctions against Russia included a prohibition on Russian-flagged ships entering EU ports after 16 April 2022.

To deal with the logistics issue, the Russian government decided on 1 January 2024 to subsidise 100% of the logistics costs of the export of several categories of dairy products, including cheese, butter and dry whey.