Russia’s Cheese Imports Likely To Rebound As Country Modernizes Grocery Marketing

Volume 132, No. 15, Friday, October 12, 2007

Russian cheese imports are expected to rebound to a range of 250,000 tons in 2007, despite higher import duties for arrivals from sources outside Commonwealth of Independent States (CIS). As members of CIS, Ukraine and Belarus traders can export cheese to Russia free of the import duties. 

The duties for other countries vary according to the type of cheese, but they are usually about $1.00 per kilogram. A ban on new import contracts for cheese from Ukraine during the first half of 2006 caused total Russian cheese imports to decline 16 percent to 218,442 tons in calendar 2006, down from a peak of 259,793 tons in 2005.

Russian Federation is one of the three leading world importers of cheese outside the European Union. EU). The US was the leading cheese importer for countries outside the EU in terms of value during the last three years. Japan is the other country among the three top cheese importers outside the EU.

Source Of Russia’s Cheese Imports
Changed Dramatically In 2006

The ban on new purchases of cheese from Ukraine in the first half of 2006 contributed to a shift to the European Union among some Russian cheese importers. 

Also, there was apparently a rush to import cheese from EU suppliers before the higher import duties went into effect on September 25, 2006. Germany moved into first place among suppliers of Russian cheese imports in 2006 with the delivery of 66,865 tons, a fifth greater than 2005 deliveries. 

The share of Russian cheese imports from Ukraine declined from 43.9 percent in 2005 to 17.9 percent in 2006. The shipment of 114,168 tons of cheese from Ukraine to Russia in 2005 included some inexpensive cheese prepared by smaller producers. 

The arrangement to resume deliveries of Ukrainian cheese to Russia during the later half of 2006, involved six larger companies with modern equipment and quality control satisfactory to Russian inspectors.

Filling the gap left by temporary barriers to deliveries of Ukrainian cheese resulted in greater purchases from exporters in a number of countries. Russian imports of cheese from Lithuania increased 59.5 percent in 2006 to 35,364 tons, a level more than double Lithuanian deliveries in 2004. 
Estonia’s shipments of cheese to Russia increased 70.6 percent to 3,763 tons in 2006.

Russian imports of cheese from Finland increased a fifth in 2006 to 17,883 tons. Russian imports of cheese from Netherlands rose by 43
percent to 16,373 tons. 

However, imports of cheese from France declined 4.2 percent to 5,658 tons and arrivals from Poland declined 45.3 percent to 4,774 tons.

A rapidly growing cheese exporter from South America expanded its sales in Russia during 2006. 

Imports of cheese into Russia from Argentina increased 70.9 percent to 12,243 tons. 

Russian imports of cheese from Uruguay declined 38.9 percent to 1,926 tons in 2006.

The higher Russian import duties implemented in September 2006 may make it difficult for the expansion of US cheese exports to Russia, although special products and selected items for expensive restaurants might allow small sales to still show up. 

Grocery Marketing Modernization
Enhances Cheese Sales
Opening of more private family grocery stores and larger displays of cheese in supermarkets have made it more convenient for shoppers to buy cheese. 
Rising consumption of cheese has helped to boost the protein content of the average Russian diet. 

Greater demand for imported cheese in Russia tended to bolster the total world demand and that provided a slight upward pressure on the price for cheese entering world trade.

Customers were able to choose from a wider selection of cheese in the last several years. In contrast to greater importance of buying a specified weight of cheese cut from a large block on the grocery store shelf, more customers were able to buy certain types of cheese in packages recently.

The overall economic setting of Russian Federation has had a strong influence on the quantity of cheese imported in the recent decade. When total exports are rising in value with higher petroleum prices and government spending is increasing, sales of cheese and some other food items increase. 

When the outlook for economic activity was shaken by questions on loan payments to IMF in August 1998, that sent ripples through the economy. 
Later on as financial matters with IMF were settled, the situation for an economic rebound came forth. 

Temporarily sales of cheese declined, and the recovery came with greater imports of less expensive cheese from Ukraine in 2000. A focus on quality and the short ban on imports of dairy products from Ukraine in early 2006 resulted in a strong shift to cheese from EU suppliers and Argentina. 

Cheese Demand Bolstered By
Situation For Livestock Products
In the early 1990s a shift from large output of meat and dairy products to smaller production because of reduced feed subsidies caused reduced per capita protein content in the average diet. 

Less consumption of meat contributed to a strong rebound for cheese consumption in the last several years. Duty-free imports of cheese from Ukraine and some other former Soviet Union countries contributed to the dramatic increase in cheese imports from the low of 19,801 tons in 1999 to 178,345 metric tons in 2003, valued at $355.2 million. 

Ukraine accounted for 24 to 29 percent of Russian cheese imports during 2001-04, compared with less than 4 percent in 1999. 

The impact of much greater petroleum revenues has meant greater purchasing power for younger and middle age shoppers. 

More government revenue from sales of natural resources tended to allow more favorable payments to retirees. 

This was important for the financial savings blinked out when previous currencies were replaced by a new currency. Russian workers who retired after building up financial assets after 1992 fared better. 

Russians now over 70 years of age suffered from a nearly complete loss of savings when the old former Soviet Union ruble became worthless. Again, they were left with problems when the Russian ruble of 1992 was reduced in value in the late 1990s. 

Prices for bread and some basic foods have remained reasonable in recent years because of the strong rebound for grain production. Russia shifted from large grain imports in the 1980s and early 1990s to surprising grain export volumes by the late 1990s. 

Russia’s wheat exports remained strong in recent years, with the exception of 2003/04 when yields had been reduced by adverse winter weather. 

The feed and financial subsidies provided by government agencies until the early 1990s were partly replaced by cooperation with multinational corporations by the late 1990s. 

The larger feed supplies contributed to a rebound for cheese output to 385,000 tons in 2006, although that was below the 515,000 tons produced in 2002. 

Attractive prices contribute to modest Russian exports of cheese, mostly to CIS markets. Ukraine, Kazakhstan, Uzbekistan, and Turkmenistan are some customers for Russian cheese exports. 

Exports of cheese from the Russian Federation increased steadily from 1,461 tons in 1999 to 3,504 tons by 2003, valued at $6.3 million. Russian cheese exports averaged nearly 9,000 tons annually during 2004-06. 

John B. Parker was formerly an international economist with the Economic Research Service of the US Department of Agriculture

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