Archive: European dairy farmers likely to feel impact of Russian ban

Published 15 August 14

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The loss of the Russian market for EU-28 cheese and butter exports has created some market disruption and is likely to exacerbate the downward trend in global dairy commodity prices, with market sources suggesting that domestic and European commodity prices are already starting to react. The annual volumes of cheese typically sent to Russia represent a significant proportion of EU-28 total exports, making the job of finding alternative markets challenging. This will be slightly less challenging for butter than cheese supplies, as global market opportunities are more widespread.

In 2013, Russian imported in the region of 438,000 tonnes of cheese[1] and 145,000 tonnes of butter[2]. Trade from countries affected by the recent ban[3] accounted for approximately 60% of Russian cheese imports and 31% of Russian butter imports. The EU-28 is by far the most directly affected by the ban, losing a market destination for approximately 260,000 tonnes of cheese (circa  2% of EU-28 milk production) and 35,000 tonnes of butter (circa 1%), according to UN Comtrade. These volumes represent approximately 33% and 28% respectively of the total cheese and butter exports of the EU-28.

In the absence of the Russian export market, it is unlikely that European manufacturers of cheese and butter will produce and export equivalent volumes as in 2013. With milk production continuing to outperform last year, there will therefore be a need to find alternative markets for cheese and butter stocks or to divert milk supplies into other dairy products, such as SMP. The likely accumulation of stocks resulting from this is expected to lead to further downward pressure on GB prices.


The possibilities for finding alternative markets for the volumes of cheese affected by the ban are limited given current global demand and trade patterns.

Only six of the 20 largest cheese import markets are outside of the EU-28, and one of these is Russia. In the markets large enough to offer significant export opportunities, the EU-28 does not currently have enough of a competitive advantage to displace other imports. It would require that EU-28 exports were offered at a significant discount to counter preferential access or geographical benefits enjoyed by current suppliers.

For example, Japanese imports are dominated by Australia and New Zealand (NZ), who accounted for 40% and 27% respectively of total imports in 2013. Both countries have a geographical advantage to trading with Japan, with Australia also benefitting from tariff free access to the markets through a free trade agreement (FTA).

Top cheese importing countries*

Cheese imports (tonnes)

Top EU-28 cheese export destinations*

Cheese exports (tonnes)

Russian Federation


Russian Federation














Rep. of Korea


Saudi Arabia






*not including EU-28
Source:  UN Comtrade

Potentially compounding the pressure on the markets will be the extent to which exporting nations unaffected by the ban can replace banned imports and limit the drop in total global demand. In addition to those countries included in the ban, Russia also imports significant quantities of cheese from Belarus, Argentina and NZ.  However, the ability of these countries to completely replace the volumes normally supplied by the EU-28 is limited. Belarus does not have a large enough milk supply to increase its exports significantly nor does it produce the types of cheeses currently imported from the EU-28. While NZ does have access to sufficient milk supplies to fulfil some of this demand, many of its plants are not currently accredited to supply Russia. Argentina is also unlikely to meet the demand due to the current economic situation in the country.

Russia’s ability to increase domestic milk production to help fill the supply gap is also limited. According to a recent USDA report, the financial situation of Russian dairy farmers continues to limit growth and milk production has been declining over the past decade.


Butter markets may be less disrupted as the displaced volumes are relatively small in comparison to global market imports. In total, the volume of butter imports banned from Russia amount to just over 45,000 tonnes, of which 35,000 originate from the EU-28. Although this represents only around 2% of total world trade in butter, a market for this EU butter will still need to be found.

Belarus, NZ, Uruguay and Argentina remain able to supply the Russian butter market, and would only require small increases to current export volumes to replace banned volumes. NZ for example exported 25,000 tonnes of butter to Russia in 2013, accounting for approximately 5% of its total export volumes. With milk production in NZ currently strong, there would an opportunity for them to replace EU-28 supplies.


The overriding impact of the Russian ban on dairy markets will be further pressure on dairy commodity prices, which market sources indicate is already being seen in GB and EU traded values. The most direct impact will be on European dairy markets, although the accumulation of stocks of dairy products will mean the downward price pressure may also impact on global markets. Factors which may affect the size of the impact of the ban will be whether the ban is sustained for the full year, the extent to which Russian demand can be fulfilled through alternative sources, how quickly China returns to the market and whether there is a slowdown in the growth of milk supplies, leading to a significant change in the global supply and demand balance.

[1] Commodity code 0406, including all categories of cheese

[2] Commodity code 0405 - butter and other fats and oils derived from milk

[3] Imports from the Ukraine were banned in July 2014, representing 11% and 2% of Russian cheese and butter imports respectively.