The Industry is Changing Faster Than Ever – Stepán Ten on Key Trends and Risks in the Dairy Market

Stepán, how would you characterize the current state of the dairy market in Kazakhstan and Central Asia? What key changes have occurred over the past year?

— The main trend defining the development of dairy farming today is the growth of milk production on large industrial farms. Ten years ago, there were few such farms, and productivity per head was lacking. Now the situation has changed: yields are steadily increasing, especially noticeable on farms registered with the National Dairy Farming Chamber.

At the same time, new farms are being built annually in Kazakhstan. The state allocates significant funds for the construction of dairy complexes, and the share of milk produced in industrial complexes is growing. However, the total volume of milk in the country, in my perception, is not increasing. This means only one thing: production in personal subsidiary plots is decreasing proportionally to the growth of the industrial segment.

A very important change I observe is the accumulation of competencies. Farms have become better at understanding animal physiology, feeding, and herd management, which gives a significant increase in efficiency.

What macroeconomic factors today most strongly influence the economy of farms?

— The most important factor is the exchange rate of the ruble and the price of milk in Russia. Since Kazakhstan imports dairy products from neighboring countries, price increases in Russia automatically raise prices in our market. This creates a temporary window of opportunities: farmers receive high income and can accumulate funds for future investments. Missing this moment is inadvisable as the market is cyclical, and a decline inevitably follows a high-price period.

The second important factor is the labor market situation with our neighbors. Currently, for example, in Russia, they offer milkmaids a salary of about 125,000 rubles for rotational work. This is incomparable to Kazakhstan's level, so some employees leave, and others demand higher wages. This directly impacts cost prices.

The third factor is the disruption of logistics chains due to sanctions and military actions. Many goods, feeds, and ingredients used to come through Russia; now logistics have become more complicated and costly. Some products have disappeared altogether, and delivery times have increased. All this affects cost prices.

Can we say that the market has adapted, or is the industry still in turbulence?

— I wouldn't call it turbulence. The market lives its natural life – cycles, rises, falls. We are simply in a phase of change, and farms have to be more flexible.

How do farms improve efficiency in practice? What solutions yield the best results?

— Farm efficiency is not about yield but profit. There are only three ways to increase it.

First, increase income. Today, the fastest way is the sale of breeding young stock. Many farms have realized that this gives a sharp increase in profitability. Farms also actively invest in genetics: modern lines produce significantly more milk.

Second, reduce costs. Here, the key is the scale effect. If you increase yields but maintain the staff, the wage component per liter of milk automatically decreases.

Third, do both simultaneously. I would particularly note feeding. Nowadays, no one composes diets based on old manuals. Enterprises transition to modern systems like CNCPS, NASEM, or DLG.

For me personally, the CNCPS system was a real breakthrough. It's a model that accurately predicts dry matter intake, milk production, and allows for the creation of the most efficient and safe diet.

What are the main risks you see for the industry in the next three years?

— There are three main risks that require close attention.

First, there is the cancellation of subsidies in 2028. The state has officially announced that subsidies for milk production will be canceled. Farms must prepare in advance. This means learning to operate profitably without subsidies. Those who do not adapt will simply disappear.

Second, the labor shortage. The urbanization process continues: fewer people remain in villages. Plus, competition from Russia remains a huge challenge. Kazakhstani farms will increasingly depend on labor migrants.

Finally, competition from China. China has made a colossal leap in dairy farming. If they become exporters, they could compete with us on our market. Their scale and development speed are enormous.

Bek+ is known for implementing modern technologies. What innovations have delivered the best results?

— The most significant effect is the transition to modern ration calculation systems, especially CNCPS.

Also, cow comfort plays a colossal role. If feeding or watering norms are violated, neither genetics nor specialist competence can unlock the herd's potential. Investments in comfort pay off faster than any other.

How actively is the market investing in digitalization and robotization?

— The situation is uneven. Farms built under preferential programs at 2.5% per annum actively invest in robots, sensors, and digital platforms.

However, existing farms forced to take commercial loans at 20–25% implement innovations much more cautiously.

For digitalization to become widespread, preferential financing needs to be expanded – not only for building new dairy complexes but also for modernizing existing ones.

What is the advantage of Kazakhstani farms on the international stage?

— It's not so much the farms as the investors. Kazakhstan today offers unique conditions:

• loans at 2.5% per annum for 10 years;

• credit holidays;

• investment subsidies;

• subsidies for cattle acquisition and per liter of produced milk.

This is a powerful incentive to develop the industry.

What will the farm of the future look like in 5 years?

— Farms will be larger. 1,200 heads are no longer a large farm. They are building for 2,400, 5,000, 6,000 heads, and in the south, plans are in place for a 10,000-head project.

The farm of the future is about large scale, a high degree of robotization, a developed information environment, fewer people, and high labor productivity.

Unfortunately, more and more jobs will be filled by foreign labor. This is an inevitable trend.

What is needed for farms to become sustainable and profitable in the long term?

— The main thing is the competence of managers and specialists. It is necessary to understand how to produce milk efficiently, how to work with genetics, how to raise young stock so that it is sufficient not only for herd replacement but also for sale. When competence rises, the industry will become sustainable.

AqAltyn is a traditional platform for dialogue. What topics are important to discuss at the industry level?

— The biggest problem brewing is the imbalance between production growth and processing capabilities. Farms grow rapidly, factories slower. At some point, processors simply will not be able to accept all the milk, and then there will be a temptation to lower the purchase price. This will hit profitability and increase the payback period of projects.