Russian milk prices set to jump

Russian milk prices will rise through the second half of this year and into next, with the drought forcing producers to pass cost increases on to retailers.

David Yakobashvili, co owner of dairy producer Wimm-Bill-Dann says prices can be expected to rise by 15% in the wake of the summer heatwave

"We can calculate the price increase mathematically. 50% of the price of milk is comprised of the cost of raw materials. That has increased by 60%. Which means prices could grow 30% from this factor. We have to monitor the situation because consumption is the main indicator for us – once it starts falling nothing will help. That’s why we have to be very careful and the government should help us. Of course we will see price hikes of 10-15%, but we will try to have it under control and hold on to our turnover."

Vladimir Labinov Executive Director of the Russian Dairy Union says the rise in the cost of raw milk since June this year has made Russian milk the most expensive in Europe.

“The purchase price in terms of European basis amounted to 13.51 roubles per 1 kilogram, while in the EU – 11.44 roubles, Ukraine – 12.65 roubles, and Belarus -10.75 roubles per kilo.”

Kirill Kolonchin, the Director of food and food processing industry and quality of Ministry of Agriculture of Russia says the rising prices reflect a market pricing in the effects of the drought.

"The fact that the price of Russian milk outstrips European level can be a reason to worry, but this is the response of the market. The Dairy industry must be profitable, even more so with the deficit of dairy raw materials, and with such an unprecedented level of state support.”

Tatiana Rybalkova the head of information-analytical center, Soyuzmoloko, said that according to the earlier forecasts of the National Union of Milk Producers, the price of milk could rise by 6-10% as a result of the drought, but she adds that whereas in the past prices would rise towards the end of the year, this year they are likely to rise sooner.