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Russian ban may lead to dairy glut

Russia’s ban on Australian food exports has raised fears it could depress global dairy prices, which are already trending down.

GEOFF ADAMS AND AAP August 12, 2014 3:00am

International milk prices are coming off, experts say.


Although some Australian dairy manufacturers don’t export to Russia in large quantities, the restriction on the European Union and the United States could lead to a glut of product which could cut demand.

The Fonterra Global Dairy Trade has reported two significant reductions in prices in the past two trading sessions.

Whole milk powder, skim milk powder and butter prices have been dropping since February on this market.

Bega Cheese chairman Barry Irvin said while it was too early to forecast the impact in detail, the trade ban would likely have a depressive effect on prices.

‘‘We are already in circumstances of global prices coming off,’’ Mr Irvin said.

‘‘It’s very difficult to calculate the exact impact because of the intricacies of global supply and demand.’’

He said Bega was not a direct exporter to Russia, but the EU and the US would find some of their products would be without a market.

Russia is an important market for Murray Goulburn, with almost $95million in business last financial year, particularly in butter.

Managing director Gary Helou said the sanctions would have some impact on their ability to maximise returns as they placed this product into other markets.

‘‘Given the importance of Russia as an importer of dairy products, particularly from the EU, we will monitor the impact of the sanctions on global dairy market settings,’’ Mr Helou said.

Australian Dairy Industry Council chairman Noel Campbell said Russia was an important market for the Australian dairy industry.

About 22000tonnes of product, the majority of which is butter, worth around $112million in 2013-14, was exported to Russia in the past year, which represents four per cent of Australian dairy exports.

Russia has introduced an embargo on agricultural products from Australia, the EU, US, Canada and others.

Those countries have imposed their own sanctions against Moscow over its policy in Ukraine.

Beef, pork, fruit, vegetables, poultry, fish, cheese, milk and dairy products are on the Russian-imposed sanctions list, announced last Thursday.

Foreign Minister Julie Bishop said it was disappointing Russia had retaliated rather than adhere to international concern and stop the flow of weapons to Russian-backed separatists in Ukraine.

It’s believed Russia supplied the weapon that was used to down flight MH17 over eastern Ukraine, killing 298 people, including 38 Australians.

‘‘The Australian Government will do everything in its power to minimise the impact on Australian agricultural producers,’’ Ms Bishop said.

Australia had acted in line with others in the international community in imposing sanctions on Russia, she said.

Russian Prime Minister Dmitry Medvedev said the ban would start immediately and last one year unless ‘‘our partners demonstrate a constructive approach’’ with regards to sanctions.

Australia exported $405million worth of produce to Russia last year, including meat, wool, horticulture and alcohol.

Fonterra has announced a step-up in milk prices. See page 53.

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