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23 Jun, 2008 14:10

Will new milk law boost Russia’s dairy industry?

Russia's dairy industry is still dependent on imports for much of its milk. The country’s government has adopted new milk regulations in an effort to promote home production. Under new standards only whole milk will be allowed to go under the label of mil

Dairy manufacturers will have to be honest about the ingredients they use and label products made with powder as milk drink.  
“This new regulation is more in line with the European standards. It's a new way of government support of the business and supervision of the consumer market in Russia. In the long term, this should be better for the final consumer as a manufacturers' guarantee of product quality,” said Ivan Kotov, an analyst from A.T. Kearney.

The government hopes that manufacturers will buy more fresh milk from farmers, thus stimulating cattle breeding and the overall development of the dairy sector. Cheap imported dry milk has recently driven the purchase price for fresh milk down to nine roubles per litre. At the same time, a litre on a shop shelf costs up to 40 roubles.

The Russian Agriculture Minister has taken a leaf from Canada's book to reform the business.

“Canada has significant livestock with good productivity, which is twice as high as in Russia. Canada has a very good system for regulating production and the overall market – from insurance to innovation. We will study this experience so we can put it to use on Russian soil,” Aleksey Gordeev said.

However, analysts warn that the growing demand for fresh milk among Russians, will drive up prices, as the country is still dependent on imports for a quarter of its milk.