Belarus had the world’s highest milk production per capita in 2021, with dairy exports totalling around $2.5 billion. Dairy production in Belarus was bolstered in August 2014 when Russian banned dairy products from the EU member states in response to EU sanctions over the Crimea conflict. Due to the lack of available import supplies from the EU and little access to other origins, Belarus filled the gap. Consequently, Belarus became the main Russian trade partner for dairy products, responsible for 85% of total Russian dairy imports before the Russian invasion of Ukraine.
Belarus, aware of its reliance on exports to Russia, was projected to diversify export dairy sales geographically and reach $4 billion by 2030. To accomplish this target, Belarus planned to increase exports to the EU to a third of total exports. However, EU sanctions on Russia were extended to Belarus, negatively impacting this export growth potential. Due to the current conflict, Belarus is looking to the east for export opportunities, thus likely mainly trading with China.
Indeed, Belarus became the fifth largest supplier of dairy products to the Chinese market during January-June 2023, up 46% year-on-year (y-o-y), at 36,200 tonnes, but down 1.4% y-o-y in value, reflecting significantly lower prices than the previous year. The main growth contributor was sweet whey powder (SWP), trading at a significant price discount, ranging from $600/mt to $640/mt FCA. Additionally, the government supports dairy exports, subsidising railway transport.
This export growth has a knock-on effect, particularly for SWP. For instance, US SWP exports decreased 15.3% during January-June 2023, at 271,000 tonnes, significantly below the five-year average. This has driven US SWP stocks upwards and resulted in plummeting prices on the CME, down 30% y-o-y.