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The index of production operational cost for milk (RMCI) in 2024 exceeded the figures of 2023 by 11.9%. This was reported in an article by Milknews, citing the analytical center of Soyuzmoloko. The increase in operational cost was caused by rising expenses in all major expenditure categories: employee wages increased by 22% in December compared to 2023, prices for compound feed rose by 3%, feed grains by 49%, diesel fuel by 2%, electricity by 11%, the dual currency basket increased by 11%, and inflation exceeded 9%.
The increase in the key rate and the rise in short-term loan rates also contribute to the cost increase for producers, as they utilize these loans to finance their operational activities. Adjusting the rules for subsidizing preferential investment loans issued during the period from 2017 to 2022 suggests a substantial increase in rates for 2025—from 2.5-5% to 10.5-12.5% with the Central Bank rate at 21%—which will also lead to additional growth in the cost of raw milk in 2025.
In December 2024, the operational cost increased by 3.4% and remained 8.8% higher than December 2023. The growth in operational expenses for milk production in December 2024 was primarily driven by increased labor costs in the pre-New Year period (preliminarily by 20% compared to November), rising electricity costs (1%), diesel fuel (2.6%), higher prices for feed grains (4.7%), ruble depreciation (the cost of the dual currency basket increased by 1.5%), and ongoing inflation. However, according to revised data, in November 2024, the operational cost of raw milk production decreased by 1.2% compared to October, due to a more significant-than-expected seasonal decrease in wages.
According to preliminary data, in December 2024, the production cost of milk remained 97.1% higher than the beginning of 2017 and 90.6% higher than in November 2024. At the same time, average purchase prices for raw milk from January 2017 to December 2024 increased by 45.6%, while nominal prices rose by 69.3% over the same period, according to Soyuzmoloko specialists.
Alexey Gruzdev, the CEO of Streda Consulting, points out that the cost of raw milk depends on four main expenditure categories: feed, wages, fuel and energy resources, and investments, and all of them are increasing. According to him, predicting the dynamics of the cost for 2025 is challenging as it depends on unpredictable macroeconomic parameters.
Maria Zhebit, the public relations director of Soyuzmoloko, notes that in the near future, further increasing costs in the main expenditure categories will put pressure on the cost. She also highlights that possible risks include preserving crops in a warm winter without snow and a possible further increase in feed expenses. Additionally, Zhebit points out that cost increase will lead to an increase in sector's credit burden due to the adjustment of rules for subsidizing preferential investment loans and the rise in rates, as well as in anticipation of rising fuel prices, electricity, and overall inflation process.
Last year, the Ministry of Agriculture reported that it does not expect a sharp increase in dairy product prices despite the rising production cost and the Central Bank's key rate, among other reasons. The Ministry of Agriculture noted that the growth in dairy production is associated with the development of dairy farming and the increase in production capacity. In 2024, raw milk production in farms of all categories amounted to 34.07 million tons, which is 0.8% more than in 2023. This growth contributed to the increased output of dairy products, including drinking milk, ice cream, cream, and yogurts.
