The well-publicized rift between Russia and the European Union, the U.S. and Canada over the battle between the Ukraine and Russia could end up hurting U.S. dairy producers. However, the potential market pain would not come directly from lost U.S. dairy product sales to the nation.
Russia has had a ban in place on all U.S. dairy products since 2010, so the huffing and puffing from Russian President Vladimir Putin on blocking meat and poultry imports from the U.S. is a nonstarter as far as U.S. dairy product exports are concerned. However, this potential backup in the trade pipeline between Russia and the EU-US could cause two other negative consequences.
Dairy heifer exports. In recent years, Russia has become a major purchaser of U.S. dairy heifers. In 2011, the U.S. exported 73,400 dairy replacements with 12 percent - or just shy of 9,000 headed - headed for Russia.
Seeing the high quality of U.S. dairy cattle in their homeland, they stepped up imports, buying 17,900 or 41 percent of the 43,000 heifers that left American shores in 2012. That number expanded to 24,700 or 37 percent of the 67,000 total head exported in 2013.
Even with the stiff replacement prices this year, the Russians still purchased 4,300 out of 20,000 head through June of 2014.
If you are doing the math, that 4,300 head was already down 45 percent from last year, as Russian banks have become more cautious in lending due to the uncertainty of future sanctions, one exporting specialist told us. Replacement values that jumped by 37 percent since the first of the year also caused the slowdown in Russian purchases.
All told, had Russia not been buying U.S. dairy heifers, there would have been an additional 56,000 heifers in the states entering milking strings from 2011 to June of 2014.
European dairy exports. While U.S. dairy exports into Russia have been 0 since 2010, the same is not true in Europe.
"Russia is the European Union's largest dairy product export market," said the U.S. Dairy Export Council's Al Levitt. "The EU sends one-third of its cheese and one-quarter of its butter to Russia. If the Russian blockade is fully enforced, that product has to find a new home," noted Levitt. "That additional product could lower world prices."
