Without European butter, Russia making more margarine than ever

One effect of Russia’s runaway inflation and international sanctions: margarine production is expanding faster than anywhere else in the world.

The country is the world’s second-biggest maker of the spread after consumers sought a cheaper alternative to butter and lawmakers banned imports from European dairies, according to a report from Oil World, a Hamburg-based market research firm. Output rose 13 percent to a record 933,000 metric tons in 2014, while production in most countries was stagnant.

“Given the state of the economy, the use of a vegetable oils would be a lower-cost solution than dairy,” Kevin Bellamy, a senior dairy analyst at Rabobank International, said by phone on Tuesday from Utrecht, Netherlands. “We’ve seen imports of butter into Russia going down rapidly.”

Russians are swapping butter for vegetable-oil spread as the country’s ban against food from the U.S. and European Union approaches a full year. The expansion in margarine production is part of a push for more locally-produced food as President Vladimir Putin promotes independence from foreign agriculture.

The country’s imports of butter and butter oil from all origins dropped 71 percent in the first four months of 2015, compared with the same period a year ago, data from the European Commission show.

Russia has an advantage in margarine production because it’s already the second-biggest producer of sunflower oil, a key ingredient. The oils are refined into vegetable fats that give the spread a smooth texture similar to butter. The country has increased margarine output for the past three years, and became a net exporter for the first time in 2014, according to Oil World.

Butter prices in Russia have risen 15 percent in the year through May, government data show. Consumption of the product in Russia may drop by about 4 percent in 2015, the U.S. Department of Agriculture’s Foreign Agricultural Service said in May.

While Russia’s ruble has stabilized this year, food inflation remains above 20 percent. The economy is entering the first recession in six years and the poverty level in the first quarter rose to the highest in 10 years.