Government purchases can save Russian dairy farms

24.04.2009 — News

THE CHELYABINSK OBLAST.

In June 2009, the Russian government is to start milk powder interventions. They will help save dairy farmers from going bankrupt.

As the Chelyabinsk oblast government officials told RusBusinessNews, dairy farms of the region suffer daily losses of about RUR 1M as the demand collapses. Processing companies reduced purchase prices for milk down to RUR 7 - 9 per litre, while the cost of production is RUR 11. The low prices are not helpful however, as the companies are overstocked with milk powder and cannot purchase raw milk in large quantities.

Milk interventions will take place in Russia for the first time. Purchase prices for milk powder will be announced in May; they are expected to be higher than production cost, which has reached RUR 96 per kilogram. Both milk processors and milk producers will take part in bidding. All the milk powder purchased will be transferred to the government reserve.

Milk powder production in Russia currently amounts to 32M tons a year, of which about 1M tons is produced in the Chelyabinsk and Sverdlovsk oblasts.