Dmitry Patrushev: ‘It is completely unclear on what basis the prices of butter were rising’

Federal support is at stake, but will the industry get 80 billion rubles again?

An alarming tone was felt in almost all the speeches of the speakers who participated in the morning session of the congress of the National Union of Milk Producers with Russian Deputy Prime Minister Dmitry Patrushev. The main guest came to the meeting with milk producers from 50 regions of the country just before the adoption of two government decisions that are important for the development of the dairy industry.

First of all, we are talking about extending the concessional lending programme for 2025. If the programme is approved, dairy farmers will receive subsidised loans at 8.3% per annum again, as last year. The prolongation of tariff subsidies for dairy exports is also at stake. If it is extended, milk processors will be able to receive 100% reimbursement of transportation costs when transporting products for export. In total, the dairy industry received budget assistance of 80 billion rubles last year and is now waiting for the resumption of these programmes.

However, the nervousness was felt for another reason: the echoes of the proceedings over the sudden rise in butter prices had not yet passed. Vice Premier Dmitry Patrushev made it clear from the start that he would not allow price hikes this year.

“Our common goal is to provide the population with all types of dairy products at affordable prices. A balance is important here — you cannot increase the production of one category of dairy products to the detriment of another for the sake of short-term benefits. Otherwise, we will have to intervene," he warned.

It later became clear what he meant. It turns out that some manufacturers have increased the production of ice cream for export, reducing the production of butter for the domestic market. “Once again, the price situation in the domestic market is a priority for us. The situation in which butter has been growing in retail since July is unacceptable," he said.

Why butter has become more expensive

Here Patrushev explained why the authorities went to extreme measures in regulating the prices of butter. In November last year, they were forced to allow its import from foreign countries, setting a quota of no more than 25,000 tonnes. The import is valid until June 15, 2025.

“Control over ensuring the economic availability of basic types of food continues. If the situation is not in favour of the stability of our own market, we have leverage. They also relate to possible export restrictions," Patrushev warned. “But, you must admit, I don't want to suddenly lose the markets that we have been conquering together for so many years.

Indeed, the geography of dairy exports from Russia has expanded. This year, access was opened to three more countries — Bangladesh, Syria, and Kuwait. Moreover, the rate of milk production is steadily increasing. According to Patrushev, 34 million tonnes were produced last year, that is, with a plus of 200,000 tonnes.

According to his forecast, demand in Russia for dairy products will grow by 2% annually, so investors benefit from this industry — by 2030, milk production should increase to 38 million tonnes. “Export is good, but the priority for the state is obvious: it is the full provision of food to our citizens," the deputy prime minister never tired of repeating.

Belov: there are objective reasons

The head of the National Union of Milk Producers, Artyom Belov, tried to argue that the increase in prices for dairy products at the end of the year was inevitable. According to him, in the current economic conditions, the rise in production costs has outpaced the increase in prices, and in these economic “scissors” the industry continues to operate. He noted that producers have been restraining prices for dairy products throughout 2023 and the first half of 2024. And he asked if there were any mechanisms that could keep prices down this year.

The deputy prime minister returned to the topic of state support. He emphasised that the industry has the most extensive tools at its disposal. “Last year, more than 80 billion rubles were allocated to your industry. This is almost one and a half times more than a year earlier. No other industry can boast of such a volume of state support," Patrushev said.

Here he assured that the authorities would help those regions that increase milk production. According to him, 30% of direct costs will be reimbursed to those who invest in the reconstruction of farms, and up to 42% will be reimbursed to those who are leading the way in steadily increasing milk production.

Answering the question of whether the preferential lending programme for the industry would be extended in 2025, Dmitry Patrushev answered in the affirmative. According to him, it is currently undergoing final revision. “New loans can be obtained at a rate of 8.3% per annum, and in my opinion, this is important and will be developed," he said.

Speaking about export subsidies, the deputy prime minister said that a government decree had been prepared. “But let's go back to the prices on the domestic market. If prices continue to rise, then the adoption of such a document will be premature," he warned.