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We can become leaders in Central Asia among suppliers of organic dairy products — Syykmyk Taichabarov, Kyrgyzstan

Kazakhstan 11.07.2024
Source: DairyNews.today
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From August 19 to 23, 2024, in the beautiful mountainous country of Kyrgyzstan, the 12th Auto Rally "Road to Milk!" will take place. This annual international movement is supported by the business association "Dairy Union of Kyrgyzstan" (DUIK). Syykmyk Taichabarov, Executive Director of DUIK, in an interview with Dairynews.today, spoke about the peculiarities of the dairy market in Kyrgyzstan, how DUIK contributes to the development of the industry in the country, and what interesting things await the participants of the auto rally.
We can become leaders in Central Asia among suppliers of organic dairy products — Syykmyk Taichabarov, Kyrgyzstan
Syykmyk, tell us about your association "Dairy Union of Kyrgyzstan."

— Our association was established three years ago. We bring together all the key players in the dairy industry in Kyrgyzstan - fr om processing enterprises to partners who provide equipment, services, feed, and ready-made solutions in the country's dairy market. Our association includes both processing enterprises and farmers, and milk collectors. Milk collectors are considered separate participants in our sector. For example, in Russia, there are milk collectors who handle logistics: transporting milk fr om point A to point B while maintaining its quality. For us, this person is considered a separate participant, and the Tax Code has a special regime designed specifically for milk collectors. This is what our organization managed to achieve at the beginning of this year.

Why was it decided to separate these specialists into a separate segment?

— Over the past 20 years, the dairy sector has reached the point wh ere milk collectors are necessary for the dairy sector of Kyrgyzstan, at least for the next five or ten years, because these 90% of all small farms are not interested in investing in logistics. A person who has two or three cows does not care who will deliver his milk – a processor or a milk collector. Unfortunately, processors lack the investments in logistics needed to ensure transportation. Therefore, we need milk collectors. The reason why we created a special tax regime for them lies in pricing. Through this, we can, first of all, make taxation transparent and, secondly, make the price of raw milk higher for the farmer. If this milk collector paid about 100,000 soms in taxes per month before 2024, now it is around 60,000 soms, which means a 40% reduction.

Tell us about the main activities of your organization.

— By uniting all participants in the dairy market, we provide a platform wh ere they can express their opinions, communicate with the state, with foreign companies, and with distributors fr om other countries. The business process we organize always includes an element of meeting with importers fr om foreign countries, as we must show our industry players the opportunities and prospects of working towards quality.

Another direction of our activity is protecting and promoting the interests of our members in the field of legislation, in writing international projects currently being implemented here in Kyrgyzstan. Many international projects have come before, engaging in various activities in the dairy sector. But what their result will be ultimately depends, of course, on communication with the private sector, not just the state. The voice of dairy producers here is our association.

As is known, the interests of processors and producers can differ. How is the protection of representatives of the dairy industry handled in such cases?

— Currently, we already have committees wh ere we gather producers and processors separately. Only after these meetings with the committees do we make certain decisions, including legislative ones, considering the opinions of both sides. Previously, we held general meetings. But later, we concluded that this should not be done because conflicts of interest may occur at the meetings, or farmers and/or processors may not fully express themselves, so we developed our committee system. I have been with this association since its inception, already serving as Executive Director for two years. I am a programmer by education, but I have a great interest in the dairy field, and I enjoy defending the interests of dairy representatives. By protecting them, we can achieve the development of this sector and, overall, the economy of our country.

So you have moved to a new level, wh ere issues are discussed more thoroughly internally. How interested is the state itself in developing this sector? Tell us about the contribution of the dairy sector to the economy of Kyrgyzstan.

— The state views this sector as more social because among our 130,000 farmers, many are women and families with two or three cows. They support their family's economy by selling raw milk. The state is only interested in integrating this sector into the economy. But in our country, only processors are subject to taxation fr om the dairy sector, as farmers are exempt fr om taxes.

What is the overall situation in the dairy industry of Kyrgyzstan today?

— I'll start with statistics. In Kyrgyzstan, the production of raw milk has not changed in numbers over the last four years. We produce about 1.7 million tons of milk per year. The figure may vary by only 10-5 thousand tons. However, we process not such a large amount – about 60% of all produced milk. And we export about 20% of all processed milk. We have now started actively exporting to Uzbekistan. This year, we also began exporting to the USA, though in very small volumes, but the numbers are there. The main markets for the last 20 years remain Russia and Kazakhstan.

What percentage goes to Kazakhstan? For example, in Almaty, the dairy shelf is well represented by Kyrgyz products.

— Before the Rosselkhoznadzor ban, the figure was as follows: we exported 60% to Kazakhstan and 40% to Russia. After the ban, the figure for Kazakhstan increased by another 20%, that is, 80% goes to Kazakhstan and 20% to Russia. Kazakhstan is always our number one market, followed by Russia.

What problems does the dairy market of Kyrgyzstan face today?

— The problem of the Kyrgyz dairy sector is small-scale production. About 13,000 milk producers are personal subsidiary farms. Only 3% of them are commercial farms with more than 50 cows, professionally engaged in raw milk production. For some, this may seem like an advantage, but we see it as a problem because, as I said, the volume of milk production does not change much in numbers. Yes, we produce, but today in Kyrgyzstan, we have 800,000 milking cows. If we compare with Japan, they have fewer milking cows than Kyrgyzstan, but they produce more milk, as do other countries. Therefore, we now see a threat and risk to our pastures. That is, pastures and, in general, the land are becoming unsuitable for our milking cows. And we see this as a problem.

How does your organization contribute to solving these problems?

— Recently, we started developing a concept for the dairy sector of Kyrgyzstan. In this concept, we intend to show which directions we should work in and which directions should become priorities. I think this very concept, which will show us the way for five years, will reduce the number of milking cows but increase raw milk production. That is, fr om quantity to quality and then to efficiency.

What other industry problems can you mention, and how does your organization help solve them?

— We have a problem with laboratories. Laboratories in the role of an arbitrator. We have state laboratories, but unfortunately, our farmers have very little trust in them. Therefore, we want to create an arbitration laboratory wh ere farmers and processors can come during disputes. If this pricing regulation is introduced, of course, the processor will most likely start lowering these raw milk indicators, and the farmer will need to turn to arbitration laboratories. This is our problem, which we want to solve. But for it to be an arbitration laboratory trusted by farmers, it must be private and self-financing. The problem is financing, the sustainability of this laboratory. Who will finance it, how will it operate? We are currently considering several ways to create it. We can do this together with existing laboratories, based on them, which have points in all regions and districts. And the farmer's accessibility to these checks will be very easy.

How is high milk quality ensured in Kyrgyzstan now?

— Currently, only 3% of professional farmers work with a stall housing system, meaning they can ensure the quality of their milk because they do not release their cows to pastures, as it should be. This is also prescribed in the Customs Union Technical Regulation "On the Safety of Milk and Dairy Products" (CU TR): stall housing, feeding, systematic approach to livestock farming. The second indicator is that due to our pastures. As I mentioned, pastures are slightly deteriorating, but overall, the grass growing in Kyrgyzstan increases the fat content of raw milk. Because of this, we can say that we have very fatty milk that we can export to various countries. Milk safety is maintained by raw milk collectors. They collect milk, ensure its cooling, and then it goes for processing.

What is the total number of livestock on pastures now?

— In general, about 80% of all cows graze on pastures. We have very little stall housing. Here in Kyrgyzstan, farms keep cows, while the rest of the cows are on pastures all year round. However, in winter, during the coldest days — January or February — we try to keep them indoors. Two or three cows. And, of course, we buy feed. Speaking of feed prices, unlike Russia and Kazakhstan, they are very expensive here. In Kyrgyzstan, there is very little land wh ere, besides hay, various grasses such as alfalfa and wheat can be grown. Therefore, we import feed fr om Russia and Kazakhstan.

An interesting point: Kyrgyzstan is one of the former Soviet Union countries that fully supplies itself with milk but cannot provide itself with feed. Has this always been the case, or did this problem appear later?

— Yes, before the collapse of the USSR, pasture efficiency was 100%, I would even say 150%. And, of course, at that time, stall housing and, in general, the dairy sector's work was truly systematic and approached comprehensively. Thanks to this system, we were at the point wh ere we were not import-dependent on feed. Now no one monitors the process of cow insemination on pastures. When a cow goes to pasture, a bull can inseminate even a pedigree cow — for example, an Alatau breed. Because of this, it becomes difficult to take care of an inseminated cow properly, as after insemination, there is no observation of these cows. The farmers' understanding of these processes is currently at a low level. Therefore, for the development of artificial insemination, quality monitoring of pastures and their efficient use should take place. This is why we are now coming to the document "Concept for the Development of the Dairy Sector of Kyrgyzstan" designed for five years. That is, we strive to apply a comprehensive solution and a systematic approach to all dairy problems in Kyrgyzstan.

Five years is a relatively short period; usually, when preparing a concept, it is considered for a longer term. I understand the step-by-step approach, but why five years?

— Until now, no one in our country has prepared such a document as a dairy sector concept. For our farmers, this will be a completely new document, which provides for restrictions for personal subsidiary farms when these personal subsidiary farms must necessarily deliver milk without antibiotics, as already prescribed in the CU TR. But we also separately made a document for Kyrgyzstan, which talks about milk quality, fat content, basis, and antibiotics. During these five years, the farmer must realize that the quality of the milk he produces ultimately affects its pricing: the better the milk, the higher the farmer's income. When I talked about milk quality, I meant the contamination of raw milk, which they deliver. Each year, the contamination of raw milk falls under restrictions. For example, in 2024 or 2025, restrictions on contamination will be introduced. If I'm not mistaken, about 200,000 or 100,000 bacteria should be in raw milk. This figure is currently very high in Kyrgyzstan; farmers, in general, do not know about the contamination of raw milk. That's why we make the concept for at least five years – so that the farmer understands that his raw milk must be of high quality and meet CU TR standards.

Is this an introductory, preparatory step for a further concept?

— Yes. Later, after the "five-year plan," we will develop a concept for 10 or 20 years. In this concept, we consider, of course, the transition fr om such an industrial scale of processing to more organic, as Kyrgyzstan is a mountainous country, feed is expensive here, but there are pastures. We can increase fat content through these pastures. Due to quality, we can become leaders among suppliers of organic dairy products in Central Asia.

Regarding milk prices, what has been the trend over the past two or three years? How much does milk cost in Kyrgyzstan now, and how, in your opinion, will the price change shortly?

— Milk prices always differ by region and season. Currently, raw milk with a fat content of 3.4% and protein 2.8% costs about 27-30 soms. The trend is now towards an increase in this price. We are developing this concept and also working with the Ministry of Economy of the Kyrgyz Republic. Recently, deputies proposed a pricing system considering milk quality and these elements and details. We expect the price of raw milk to rise, but with the conditions that fat content, protein, basis, and quality are considered.

What is the seasonal price range, and how does the pricing process work in Kyrgyzstan?

— The maximum price rises to 45 soms. The minimum price is divided into "at the gate" and when the farmer sells milk to the processor, that is, two prices. The highest price "at the gate" for the processor is about 45 soms. For the farmer, at the same time, it is about 40 soms. That is, the collector takes 5 soms for logistics. The lowest price in the district is about 20 soms "at the gate." This price is for milk with a fat content of 3.4% and protein of 2.8%. Such prices are set in the summer, by the end of May, this price is already irrelevant.

Is this percentage regulated or set by the collector? For example, in some countries, collectors have a certain margin percentage, and this is regulated by law. That is, a percentage is allocated, and he cannot go beyond it.

— Unfortunately, this is not regulated by either the state or the processor. The collector buys milk fr om farmers based on his expenses. Maybe after five years, this will happen. We are now moving towards bypassing milk collectors. And transition to a new raw material collection system. Today, this collector has his milk collectors working for him, 10-15 people, who collect, cool, and transport to well-known enterprises here, such as "Belaya Reka" or "Umut and Co." But this system is outdated. We need to move to a new system, wh ere the same collector can make a mobile reception point together with farmers, cooperate, to be one subject. Not separately the collector and the farmer, but already one cooperative supplying raw milk to the processor. Yes, the farmer, as I think, will always complain about the price of raw milk, as in the USA, Japan, and Kyrgyzstan. Now, relying on IFCN prices, we want to make such regulation, wh ere the minimum markup on raw milk is established. But already, of course, considering fat content and protein.

What is the state's role in raw milk pricing in the country? As far as is known, Kyrgyzstan is a unique country wh ere, despite the state not financially helping the dairy sector as much as other countries, this area is very successfully developing.

— I think, until now, the state has not interfered much in the dairy sector because farmers had a truly decent price. Now the state is trying to start regulating these prices to be fair for everyone. The state will play the role of an arbitrator between the farmer and the processor. And our association will act as an advisor to the state on how this process should generally take place. We will contribute to more equitable regulation: clarifying details, how to regulate, and what numbers to rely on. For example, we can rely on international prices set by IFCN or on pricing based on feed within the country, considering such parameters as fat content, protein, quality, contamination, and so on.

Tell us about export opportunities: who supplies where now, and are there any interesting export cases?

— Probably our most unique case is with the company "Shoro," which we plan to visit with you as part of the Auto Rally. They produce both national products and dairy products. We want to go more in this direction because we have products like "sary mai" (ed. note: homemade butter). I'm not a technology specialist, but it's a kind of butter made by special Kyrgyz technologies. The company "Shoro" has a national product made from milk; we call it "chalap," maybe you have tried it. These products are exported to the USA. They started exporting this product, it seems, three years ago. They have now increased their volumes. For us, domestic Kyrgyz producers, this was a "boom!" And they believed they could export to countries with very high control, even higher than in Kazakhstan. And our company is very proud of this.

Syykmyk, finally, tell us a little about the Auto Rally, which is coming soon in Kyrgyzstan. What kind of dairy Kyrgyzstan will the participants of the auto rally see?

— The dairy auto rally is a unique event in Kyrgyzstan that brings together leading dairy industry specialists, livestock farm managers, and representatives of leading dairy factories. The program includes tours of dairy enterprises, milk reception points, and farms. Tours to farms with Kyrgyz flavor – with mountains and pastures. The dairy sector of Kyrgyzstan differs from Kazakhstan and Russia in that we are a mountainous country. Raw milk production is carried out precisely in mountainous areas. Auto rally participants will see raw milk production in the mountains. Our participants will also have the opportunity to see how the dairy industry operates in different parts of our country. Because raw milk production in the same Issyk-Kul region differs from the Chui region. In the Chui region, stall housing is more developed, while in Issyk-Kul, it is more pasture-based. As part of the Auto Rally, we will visit three regions: Naryn, Issyk-Kul, and Chui.

Syykmyk, thank you very much for the interview. See you at the 12th Auto Rally "Road to Milk!" in Kyrgyzstan!

The International Movement Dairy Rally "Road to Milk!" is an annual event that brings together all dairy industry participants: livestock farm managers, dairy factory representatives, industry agencies, and the media.

From August 19 to 23, 2024, the 12th Auto Rally will be held in the Republic of Kyrgyzstan.

The organizers of the Auto Rally are the information agency The DairyNews and the Dairy Intelligence Agency (DIA).

You can get the preliminary route of the event, register, and become a partner of the 12th Auto Rally "Road to Milk!" in Kyrgyzstan on the event website or by email at ads@dairynews.today.

The number of places is limited.
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