Traditionally, Belarus is considered to be the main supplier of dairy products to the Russian market. Recently, however, Iran has emerged as a new Middle Eastern competitor in this space. Long-term sanctions have led to self-sufficiency in Iran’s domestic agricultural sector, and today more than 400 Iranian manufacturing companies not only serve the entire domestic dairy market but also export up to 600 thousand tons of dairy products worth over $625 million every year. The Iranian government is supporting the growth of this figure to 1 million tons in order to become a top 20 global dairy exporter. Taking into account the development of Iranian - Russian relations, these plans may become a reality in this year.
Since 2016, the Russian Rosselkhoznadzor (Federal Service for Veterinary and Phytosanitary Surveillance) has officially certified a number of Iranian dairy producers, and after a short time the first deliveries from them were organized. Mohammad Sadeghikhorabadi, Iran Country Manager at AsstrA, talks about skimmed milk powder transport projects from Iran to Moscow.
In March of this year, we received an order for the transportation of dairy products across Russia from one of the largest Iranian producers. 500 tons of skimmed milk powder on pallets were to arrive via the port of Anzali to the port of Astrakhan, and AsstrA took over the entire onward logistics chain process within Russia starting from loading. The Client’s order to initiate the cargo export process from Astrakhan came in early May. On May 5th, the first car was sent, and less than two weeks later the last pallet was delivered via road transport. In total, we loaded 26 machines. Milk was sent to Moscow in customs transit mode. Transit declarations were drawn up by a specially contracted customs broker, while Electronic Preliminary Information (EPI) customs support for all 26 cars was provided by AsstrA specialists. In other words, we provided the Client with full escort of cargo within Russia starting from warehouse storage and finishing with filling out all necessary documents.
What is the overall situation on the market for transport from Iran to Russia? How hard is it to find a reliable contractor with competitive prices?
In this multimodal transport project, sea transport was provided by the sender and we were responsible for road transportation through Russia. However, when looking for contractors, we faced a significant problem: the rates offered at the very beginning were too high for the customer. But thanks to a solid working relationship with a proven agent in the port of Astrakhan, we were able to provide suitable local carriers both from our own fleet and trusted third parties.
Were there any special requirements for safety, cargo certification, or compliance with a temperature regime?
Compliance with strict temperature conditions for the transportation of dried milk is not required, so mainly standard tent trucks and partial refrigerators without temperature control were used. As for the formalities, the shipper prepared the required documents before transportation: a veterinary certificate with translation into Russian, product quality certificates, a certificate of GMO absence, and a form A certificate. Before shipping each truck, a veterinary inspection was carried out and seals were stamped. And only then, after all these procedures, could the cargo be sent. When receiving the cargo in a specialized warehouse in Moscow, the load was also checked by a veterinary inspector.
How will the situation regarding dairy product cargo transportation from Iran develop? Will the volume of exports grow, or is it unlikely that Iran will become Russia’s “next Belarus”? What do you think?
Firstly, it should be mentioned that almost half of the Iranian companies certified for export of dairy products to Russia are the country’s largest manufacturers, which control up to 90% of the total market. Therefore, the current volume of supplies to Russia is only the beginning. We are just testing the water. The vast majority of the Iranian export volumes continue to go to neighboring Iraq and Afghanistan.
Secondly, despite Iran’s rather high domestic average milk price of 30 euro cents a liter (note: the average selling price in the EU is 21.5 euros a liter), the Iranian government subsidizes manufacturing companies so as to increase the price competitiveness of Iranian dairy products abroad. In the Russian market, the price of Iranian pasteurized milk, 18 euro cents per liter, is lower than that of Belarus, 23 euro cents a liter. Likewise, Iranian milk powder is priced at 1.8 euro per kg, and Belarussian at 2.23 euro per kg.
Thirdly, Iranian products are still "terra incognita" for the Russian consumer. As brand awareness, advertising, and marketing activities grow, Iranian dairy products will win their share of the Russian market. Yet it is too early to know how large this share will be.
And finally, the two-year talks on the establishment of a free trade zone (FTA) between Iran and the Eurasian Economic Union are now at the final stage. The new agreement will allow Iran to transport more than fifty groups of goods, including agricultural products, with reduced import duties.
All the above mentioned facts unambiguously point to an approaching increase in the volume of supplies from the Middle East.
What are the main obstacles you see for the development of dairy product transportation from Iran?
If we talk about exports to Russia, then it is political resistance from domestic Russian producers. From 2016 to 2017, imports of dried milk from the Middle East grew by almost 20%, while the supply volumes from Iran increased fivefold. After that, Russian companies began to lobby the Ministry of Agriculture to monitor imports from Iran, Turkey, and a number of other countries to prevent price dumping. No steps were taken. In the future, of course, it is possible to introduce restrictions on the supply of a number of goods, but so far there are no real indications this will take place.
If we are talking about the development of cargo transportation in general, the biggest problem is Iran’s geographical position. Iran neighbors only two of the world’s top dairy importers, China and Russia. More time, costs, and effort are required for transportation to Germany, France, and the other EU countries. That is why it is too early to talk about world export plans. But in any case, even if current export growth rates are maintained, 500 tons of dried milk will soon seem like a drop in the bucket, so to speak.