Fonterra is to close its office in Moscow and relocate staff elsewhere; confident of finding alternative markets for dairy products

Forty years after first sending shipments of butter to Russia - New Zealand is ending exports to that country following its invasion of Ukraine.

Fonterra has on Monday said it would "exit" its businesses in Russia following the dairy co-operative’s decision to suspend shipments of product to that country at the end of February.

Exports to Russia, primarily of butter, make up about 1% of Fonterra's annual business.

Fonterra chief executive Miles Hurrell said the co-op's first step following Russia’s invasion of Ukraine was to establish the safety of the team in Russia, "and our priority through this process continues to be doing the right thing by our people".

“We then suspended shipment of product to Russia while we assessed the impact of economic sanctions and discussed our long-term plans with our customers and joint venture partner.

“Following careful consideration of the impact on our people and our long-term plans for the Russian market, we will now close our office in Moscow, re-deploying staff where possible, and withdraw from our joint venture Unifood.” This joint venture has been going since December 2018.

Fonterra has seven employees with Fonterra Russia (sales office) in Moscow, and there are 35 employees with the JV Unifood in St Petersburg.

A Fonterra spokesperson said exit "will come at a cost to the co-op" but this will be "less than $10 million so not considered material".

Hurrell said given the current strong demand for New Zealand dairy products, "we are confident in our ability to re-allocate this product to other markets".

Dairy product prices have been sky high this year as strong demand has run into crimped supply. Production in the current New Zealand season is well down on earlier expectations and running about 4% below last year's levels.

That's all seen Fonterra signal a Farmgate Milk Price likely to be around $9.60 per kilogram of milk solids - which will shatter the previous record payout of $8.40 in 2014.

See dairy payout history and economists' price predictions.