Economic challenges threaten Russian dairy industry’s growth

A combination of shrinking state support, persisting labour shortages and rising costs of borrowed funds has put pressure on dairy operations. Photo: Canva

A drop in the Russian dairy herd population and soaring production costs will impact the future of the dairy industry, local news reported.

Russia’s dairy herd shrank by 3.2% or 245,000 head in 2024, estimates Soyuzmoloko, the Russian Union of dairy producers. While a decline in the number of dairy cows in Russia is a long-term trend, research has shown that last year the decline accelerated.

Moreover, the corresponding decline was recorded in the industrial segment where the number of dairy cows in recent years was on the increase. This could be seen particularly in Siberia, where the industry lost 7% of dairy cows in 2024, Soyuzmoloko data revealed.

Investments paused

The trend is primarily attributed to a slump in investment activity in the local dairy industry, local Dairy News reported. A combination of shrinking state support, persisting labour shortages and rising costs of borrowed funds has put pressure on dairy operations.

Dmitry Mironchikov, an independent industry analyst, said that the recently-approved changes to state aid distribution in October 2024 dealt the heaviest blow to the dairy industry, hampering milk production.

Alexander Medvedev, general director of Malakhovo, a prominent dairy producer, also underlined the threat of labour shortages. He revealed that to deal with the crisis, the company plans to resort to a different solution and work with a recruiting firm in order to hire workers from Cuba and India to be employed at Russian farms.

Rising taxes

The list of the challenges is on the rise. Nikolay Trofimov, general director of the Nizhny Novgorod Dairy Union, admitted that the government tax reform, under which corporate tax was raised from 20% to 25%, and several other taxes and duties were increased since 1 January 2025, also became a heavy burden for the industry.

Looming bankruptcies

Trofimov claimed that a recently-approved gradual rise in the utilisation fee on agricultural machinery would become unbearable for Russian farmers. He warned that a dramatic price increase due to the tax reform will eventually lead to noticeable impair technological use of Russian agriculture.

Against this background, some analysts are painting a bleak picture for the industry’s future in 2025. Industry analyst Alexander Polyak claimed: “In 2025, a mass bankruptcy of small companies and dairy farms can be anticipated.”