European ambassadors voted to extend the European Union Trade embargo until January 31, 2016, reports the Associated Press.
The embargo was enacted last August in retaliation for Russia’s adventures in the Ukraine.
Russia, in turn, has banned European, U.S. and Australian products, including all dairy products. The Russians say they will not lift their trade embargo until the Europeans do so. That has resulted in European dairy products backing up in warehouses and lowering milk prices for European farmers.
“Russian dairy producers initially benefited after the August 2014 ban on dairy imports,” says Mary Ledman, dairy economist with the Daily Dairy Report and president of Keough Ledman Associates Inc., Libertyville, Ill. “Domestic production filled retail shelves that were left barren from lack of imports.”
Russian cheese production increased by 7 percent, or 47,000 metric tons, and butter output increased 15 percent, or 33,000 metric tons, according to a recent USDA Foreign Agricultural Service GAIN report.
“By the first quarter of this year, however, Russian consumers’ lack of purchasing power and their desire for less-expensive and better-quality dairy products resulted in a saturated market,” notes Ledman.
Milk production in Russia is expected to decrease 2.2 percent to 29.5 million metric tons in 2015 as the country’s dairy herd contracts. The Russian dairy herd is expected to shrink by nearly 4 percent in 2015 to 7.75 million head compared to the prior year, according to USDA. The contraction will be driven by both economic conditions and lower wholesale milk prices, says Ledman.