Kazakhstan’s dairy sector issues

Kazakh dairy farmers are eligible for state aid from the national budget. In 2023, the government expected to allocate 11.2 billion tenge (US$24.8 million) to support dairy businesses. This figure doesn’t include a partial reimbursement of investments into new capacities and subsidies on interest rates on bank loans, Kozhevnikov said.

These numbers may look solid, but Kozhevnikov said they are not sufficient for Kazakh dairy companies to face stiff competition with the Eurasia Economic Union (EEU), a trade bloc of 5 post-Soviet countries.

State support for dairy

During the talks about establishing a common customs space within the EEU, the authorities of all members states emphasised the need to level out the state aid across the trade union. Kozhevnikov estimated that the state support equaled to 18% of the dairy business revenue in Belarus, against 10% in Russia and only 3-4% in Kazakhstan.

However, Kozhevnikov admitted that state aid eventually remained at the same level in all countries. “Agriculture as a whole is in a rather difficult situation. But this does not mean we should give up,” Kozhevnikov said.

Kazakhstan’s dairy industry is comprised of 172 factories, which process 2.5 million tonnes of raw milk combined on average per year.

The industry is currently facing a strength test in the form of rising imports from Russia. According to Kozhevnikov, the key challenge is associated with the Russian government’s decision to subsidise 100% of logistics costs for the delivery of dairy products to foreign customers from 1 January 2024.

Dairy issues

While the competition intensifies, the Kazakh dairy industry have been long-standing issues. Kazakh dairy processing factories lack high-quality raw milk. Out of the entire production volume, only roughly a third is fit for manufacturing premium goods, Kozhevnikov said, attributing this to non-compliance with production standards by a large number of milk farmers. To make a difference, the government needs to launch a profound reform of the dairy sector.

“We have been saying for 10 years that we need to develop large-scale farming and unite backyard farms into cooperatives, into organised forms of production. Because today, unfortunately, we have to chase every cow with a bucket. To find, let’s say, 3 tonnes of milk, factories need to go to around 3,000 households to collect it,” Kozhevnikov said.