Kazakhstan: what future for the dairy farming?
Having said this, I believe that the time has come to rethink the approach and “restart” support programmes to agriculture and agribusiness, including the dairy industry, as it is one of the major value addition sources to primary production and an essential element of food security. Importantly, this should be done in close collaboration with industry associations, and the first step would be a long-term strategy. Looking back, we see that development programmes would often change their course and, in spite of significant funding fr om state budget, have not yielded the expected results. In fact, smallholders are still the main category of fresh milk producers in Kazakhstan: about 75% of total milk output and 50% of milk received by processing factories. Having doubled over the past decade, the growth in the number of dairy farms cannot go unseen, yet this is still not enough. The dairy farming industry needs therefore a 360 degree transformation to aim at efficiency, inclusiveness, and sustainability.
Only through the establishment of a continuous public-private policy dialogue, the national dairy industry will be able to unlock its potential and substitute imports, create new jobs, contribute to rural development and to the republic’s economy as a whole. For all these reasons, since 2018 FAO and the European Bank for Reconstruction and Development have been working hand in hand with the Dairy Union of Kazakhstan and other industry associations to establish a constructive, inclusive and transparent dialogue between business and government. This work resulted in the National Milk Quality Roadmap (https://kazsut.com/dorozhnaya-karta/) adopted by the Government of Kazakhstan.
Indeed, an enabling environment is a precondition for Kazakhstan to tap into its promising opportunities.
First of all, its market size is growing and will continue to do so in the future. According to our estimates, the per capita household consumption of dairy is about 100 kg of milk per year, which is still significantly lower than the recommended norms of 301 kg [1]. In addition, the growing population (+1.3% in 2020) and the influx of migrants from Russia, Byelorussia, and Ukraine (over 200 thousand people in the first quarter of 2022) mean that there are new consumers with their consumption habits. Also, demand is not only growing in the domestic market: indeed, the export of Kazakhstani dairy products is growing too. For example, in 2021 the republic delivered about 200 tonnes of dairy (in milk equivalent), which is a 3-fold increase over the past 5 years.
Secondly, Kazakhstan’s dairies have been operating for many years with acute shortages of raw milk. While the technical regulation of the Eurasian Economic Union is yet to enter into force, the gap in fresh milk is already huge. Starting from January 1st 2025, when the norms will fully come into force on the territory of Kazakhstan, the situation will worsen unless the Government addresses systemic issues in close collaboration with the private sector. Now, let’s talk some numbers. According to the Dairy Union of Kazakhstan, today’s processing capacities are exploited at only 60% of their potential, due to the lack of raw material. This means a shortage of 0.8 million tonnes of raw milk per year. If in two years’ time [2] Kazakhstan does not manage to significantly increase the production of high-quality milk, this indicator will show no improvement.
Current structure of imports of dairy proves the acute shortage of high-quality raw milk in the country. Thus, from 2017 to 2021, imports of potential raw material for dairy averaged 17% of the imported quantities or over 100 thousand tonnes of fresh milk that could have been produced in the republic! Now, if we look broader and include some dairy products categories that require high-quality milk (e.g., yoghurts, cheese), import substitution potential reaches 30-35% per year, or more than 200 thousand tonnes of milk. As we can see, high-quality fresh milk availability is the main bottleneck to unlock industry development: Kazakhstan’s dairies have all the necessary technologies and specialists to foster this development, and the demand is large and growing. To sum-up, out of more than 600 thousand tonnes of imported dairy, almost every third ton could be produced and processed within the country. According to the most conservative estimates, the five-year dairy import substitution potential is US$1 billion for the economy of Kazakhstan.
In other words, all the prerequisites for rapid development are in place. Yet, for the potential to become a reality, certain conditions are still needed. Of these, the most important is a long-term, comprehensive strategy for the development of livestock industry in general, and dairy in particular. Moreover, the time has come to reconsider the positioning of agriculture and food industry in relation to oil and gas. Support programmes should coordinate with rural development and other programmes. If not, who would dare to invest in a dairy farm in an area without good roads, a supermarket and wh ere it is difficult for children to find friends, since there are only 10 of them in the class?
Yet, no plan can turn to action without qualified personnel. This requires urgent systematic work in the field of agricultural competencies, getting the best international expertise onboard, provision of incentives to those who work efficiently and invest in sector development. Professional advisory services, and first of all on veterinary issues, will help farmers work more efficiently and make their valuable contribution to industry competitiveness. Investment in human capital will most certainly also raise the prestige of working in dairy farming, attracting the young generation. Effective support of smallholders, in parallel, includes technology transfer, access to quality inputs - such as feed, and professional services that will unlock their development potential while securing their marketplace.
A powerful incentive for the development of the farming business would be the enforcement of food safety requirements to all market players. The specificity of Kazakhstan is that almost half of milk placed on the market [3] “flows” to the consumer through an informal (non-corporate) channel: on tap or by weight, bypassing the industry. An application of food safety norms to all market players, including those operating in non-corporate channel, will certainly lead to the consolidation of the industry and increase its competitiveness because, as international experience proves, there is no alternative but to meet high standards”.
Let’s also keep in mind that agriculture in Kazakhstan is highly dependent on a rapidly changing climate, which cannot be ignored when thinking of the future dairy industry. Modern livestock management standards call for a range of practices to reduce environmental footprint and guarantee animal welfare. One feature of the livestock sector is the objective and constantly growing dependence on the health status of productive animals. The increase in animal protein consumption by the Earths’ inhabitants implies rises in livestock population, which enhances the negative effect of epizootics and calls for special attention to veterinary issues. Aside from the threat of zoonoses - the transmission of especially dangerous diseases from animals to humans - veterinary problems also reduce production efficiency significantly.
In a broader context, these problems pose threats to the entire population of the planet, most clearly manifested in the emergence and development of the COVID-19 pandemic, which was the result of an animal-to-human virus spillover itself.
Therefore, along the entire chain, at all instances - public and private - there is a critical need for personnel with competencies that respond to the modern challenges of the agro-industrial complex. If such conditions are created by the state, I am sure that in a couple of years we will see the rapid development of existing farms and the establishment of new ones.
Kazakhstan is challenged to find an efficient and sustainable way to unlock its rich economic opportunities. Indeed, Kazakhstan has a unique opportunity to use its vast land resources to generate profits in domestic and regional markets, including the People's Republic of China. Looking into the future, we see a growth in the region’s population and in their incomes, all of which will influence the rise in demand for high-quality protein sources and dairy products in the first place.
In conclusion, I would like to note that the XIII Dairy Olympics in Almaty has become timelier than ever. Its platform provided an opportunity for all participants in the dairy value chain “from field to fork” to discuss ways of efficient and sustainable development of the industry, ensuring the sustainability of existing investments and the attraction of new ones. Many thanks to its organizers for this opportunity.
Sources and important notes:
1. Order of the Minister of National Economy of the Republic of Kazakhstan dated December 9, 2016 No. 503 “On approval of scientifically based physiological norms for food consumption”.
2. In January 2025, the postponement of the full transition to the Technical Regulation of the Eurasian Economic Union ends.
3. The total output of such milk in 2021 amounted to 3.9 million tonnes.
