Land of milk in Sverdlovsk Region

23.09.2013 — Analysis

The Ural village with its 70% dependence on milk production desperately needs financial backing. The government ration is hardly enough to survive – a leap forward cannot be made without investment loans. In the meantime, banks do not want to give money to impoverished villagers. The RusBusinessNews columnist tried to find out how to make the Ural land of milk profitable.

Only those who have reliable anchorage can make a breakthrough. For example, Patrushy, an agroindustrial firm thriving under the wing of the Ural Mining and Metallurgical Company. The metallurgical holding company became involved in the agricultural business at the request of the regional government authorities. The metallurgists decided to make the social project profitable by investing sizeable funds.

The production is fully automated. The animals have a balanced ration based on farm-made feeds; their health is monitored with the help of a "smart" collar: If there are any deviations in behavior, the animal is examined by the veterinarian. The outcome – nearly 9 thousand kilograms of milk a year per one cow – it is the highest milk yield in the Sverdlovsk Region. Raw milk is processed at the dairy plant owned by the agroindustrial firm.

For most commercial farms, it is a long-term goal. At the moment, they have to teetering between the galloping inflation and instability of prices for milk. The subsidies in the amount of 3-3.5 rubles for one liter are of some help to milk producers; in 2013 another 65 kopecks were added by the Federation. On the other hand, the price for feeds went up 2.5 times within the last season, let alone prices for fuel, oil, lubricants, and electricity, which are rising annually.

Commercial farms cannot switch over to gas, which is not as expensive, due to their pressure for money. Cooperation with villagers might be helpful, but not everybody is ready to cooperate. "There is a regional program for gas infrastructure development in villages, but we are not able to participate in it: At first, we must design a project at our expense, and it will cost us a few dozen thousand rubles – we cannot afford such an amount of money single-handed. We offered split the expenses to other commercial farms, but they did not agree," the deputy chairperson of one of the integrated agricultural production companies told RusBusinessNews.

In their turn, the regional authorities earmark funds for construction of gas pipelines and networks. In 2013, 2 billion rubles will be spent on this construction; in the next three years another 5.43 billion rubles will be allocated. The municipalities are given support in designing of heat supply network layouts.

Blue fuel will help commercial farms to cut significantly milk production costs and increase the output.

Milk processors raise the alarm about shortage of raw milk. Igor Pekhotin, the chairperson of the Union of Dairy and Processing Industry of the Sverdlovsk Region, told RusBusinessNews that at present nearly half of raw milk has to be bought in other regions.

As farmers say, in 2013 the plants that used to set prices had to loosen their purse-strings because of the milk shortage – raw milk is purchased now at the price of 14-17 rubles. Previously, summer prices went down below 13 rubles.

In the Sverdlovsk Region, half of the dairy product market has already been conquered by "outsiders"; local milk processors are ready to increase the production by 15-20% annually, if they have sufficient raw milk supply. In the opinion of Arkady Ponomarev, the chairperson of the Russian Union of Dairy Industry Enterprises, the production and processing must parts of the one so that the sector would operate efficiently.

The "out-of-home" purchases can be detrimental not only to the region’s economy, but also to health of the population. Despite all the difficulties, Sverdlovsk producers guarantee the quality of their milk. Vladimir Mymrin, the General Director of the Ural Breeding Center, told RusBusinessNews that at present the dairy livestock of the regional farms have 40 thousand breeding cows – almost half of the stock. The pedigree selection of dairy cattle in the Sverdlovsk Region is 80-year-long and has unique genetic resources.

The region boasts the tried and tested feed quality control system as well as the system of early diagnosis of animals’ diseases. The Middle Urals became the only region of the Russian Federation, where bovine leukosis was completely eliminated. During the last years, no occurrence of the infectious disease has been registered.

"First of all, quality of the product means the level of its safety. Our Sverdlovsk milk is the best. Its chemical composition is stable," V. Mymrin assures.

The Sverdlovsk Region ranks 8^th in Russia in the milk yield per one forage-fed cow – last year the yield was about 5,900 kilograms. The milk yields are even one third higher at breeding farms.

However, by the estimate of the milk processors, at least 10 large farms must be built to ensure the resource security of the region. At the recent meeting with Nikolay Fedorov, the RF Minister of Agriculture, there was request for support from the Russian treasury.

In the meantime, the Middle Ural authorities try to solve the problem without waiting for assistance from Moscow. In 2013, 1.5 billion rubles were earmarked for financing of the program for development of dairy farming. One third of the amount will be channeled to construction and upgrading of 24 husbandries and production facilities in the dairy industry.

"In the last one year and a half we have significantly changed the volume of support given to dairy stock farming. There are funds, there are farmers who are willing and ready to work. The problems of livestock farmers must be solved and we do not have time to wait, if we want to have our new facilities commissioned on time," Denis Pasler, the Prime Minister of the region stated.

The dairy stock farms have the possibility to compensate 30% of the expenses on the construction of production facilities and 50% of the expenses on the equipment. In 2013, the support was provided to such dairy complexes as Patrushy, Kamenskoye, Kilachevsky, and Nadezhda.

Another 56 facilities for 32,600 spaces will be built and renovated in the next seven years. It will satisfy the demand for raw milk by 75%.

The Middle Ural authorities are interested in the project offered by Wimm Bill Dann. The company is planning to try out purchasing and handing over cows to Bashkir agricultural producers who will take the cows in exchange of milk. "We are ready to look into the similar project. In our region there are stable farms, which, however, do not have enough money to purchase livestock. Think over this option," Denis Pasler instructed the regional Ministry of Agriculture and Food.

Lyudmila SOLODKOVA