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Cargill forms pact to leverage ‘emerging opportunities for value-add dairy NPD’ in Russia

By Jane Byrne

12-Feb-2016
Last updated on 12-Feb-2016 at 12:36 GMT2016-02-12T12:36:36Z

© istock.com/Arie Mastenbroek
© istock.com/Arie Mastenbroek

US agribusiness group, Cargill, and Iowa based feed additive supplier, Diamond V, have formed what they call a ‘strategic alliance’ to capitalize on the dynamism in the Russian livestock sector.

What it means in practice is that Diamond V’s nutritional platform will be “incorporated” into Cargill’s animal nutrition products and services under the Provimi brand in Russia.

The alliance, they said, will help Russian producers access global expertise.

Jason Shelton, managing director of Cargill Animal Nutrition in Russia, told us though Russia is one of the world's largest dairy markets and among the top five for total milk production, one of the main challenges these producers face is improving rumen fiber digestion and achieving better synthesis of rumen microbial protein.

Diamond V's additive technology, he said, can help the Russian dairy sector to meet this challenge by supporting robust digestive health, balanced rumen microbiota, and the optimal rumen environment.

“In a period of variable economic returns for dairy producers, the need is greater than ever for efficient production while supporting overall cow health,” said Shelton.

Extensive research and global experience prove that improved rumen health and function correlate with better overall health, performance, and feed efficiency, said Cargill.

It added that Diamond V is also set to contribute dairy training programs and audit support services, forage management, cow comfort, heat abatement, and milk quality assurance programs.

Shelton said as the Cargill and Diamond V partnership in Russia grows, the plan is to leverage emerging opportunities for value-add dairy NPD. “In addition to dairy, however, the Russian swine and poultry industries, both of which already are among the top half dozen in the world, are ripe for new innovations and technology,” he said.

Russian dairy trends

Russian milk production totaled nearly 30 billion tons in 2014, an increase of only 0.08% on the previous year.

The Foreign Agriculture Service  (FAS) of the US Department of Agriculture (USDA) in Moscow forecasted in May last year that cows-in-milk would total 7.75 million head in 2015, a nearly 4% decrease from 8.05 million head in 2014.

Russian government statistics, according to that May 2015 report , also indicated that backyard dairies still account for almost 47% of the nation’s milking herd, while large-scale agricultural establishments only account for slightly more than 40% of cows.

This is quite different from some other livestock industries in Russia, noted the USDA, with over 90% of Russia’s poultry flock is held at large-scale industrial farms.

According to industry sources, most cattle used for milk production in Russia are still dual-purpose breeds, with average annual yields varying between 3.5 and 4.5 MT per cow.

“When the economics prove challenging for backyard farmers it is not uncommon to see an increase in the rate of slaughter among these cows,” said the USDA’s report.

Cheese was the category which suffered the most from the embargo on the import of dairy products from the EU imposed by Russia in 2014, and imports of cheese and cheese products contracted by 35% in 2014, noted Euromonitor in an August 2015 look at Russian dairy market trends.

The analysts noted, though, that the Russian government used this situation to proclaim import substitution as one of the major industrial goals, leading to a rather strong increase in the domestic production of cheese to partly cover the decline in imports.

Euromonitor predicted that cheese products will reach sales of RUB456.3bn (USD$5.75bn) in 2020.

The data agency also reported that drinking milk products will remain highly popular amongst Russians, with the sector expected to reach sales of RUB261.4bn in five years’ time.

But it said yoghurt and sour milk products are set to see slower growth, and forecast sector sales worth RUB189.1bn in 2020. Increasing competition and the movement of the category towards saturation are expected to take place from 2015 until 2020.

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