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 according to DairyCo.

It says 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 and 145,000 tonnes of butter. Trade from countries affected by the recent ban accounted for approximately 60% of Russian cheese imports and 31% of Russian butter imports.

DairyCo notes the EU-28 is by far the most directly affected by the Russian 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.

DairyCo outlines that 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 milk prices.