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

Stepan, how would you describe 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 increase in milk production at large industrial farms. Ten years ago, there were few such farms, and the productivity per head left much to be desired. Now the situation has changed: milk yields are steadily increasing, which is particularly evident in farms registered with the National Dairy Chamber.

Simultaneously, new farms are being built annually in Kazakhstan. The state allocates massive funds for the construction of dairy complexes, and the share of milk produced at industrial complexes is growing. However, the overall volume of milk in the country, in my opinion, is not increasing. This only means one thing: production in private households is decreasing proportionally to the growth of the industrial sector.

An important change I observe is the accumulation of competencies. Farms have become better at understanding animal physiology, feeding, and herd management. This provides a significant boost in efficiency.

What macroeconomic factors are currently having the greatest impact on the farm economy?

— The most significant factor is the ruble exchange rate 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 opportunity: farmers receive high income and can accumulate funds for future investments. Missing this moment is not advisable since the market is cyclical, and a high price period is inevitably followed by a decline.

Another important factor is the labor market situation with our neighbors. For example, in Russia, milkers are currently offered a salary of about 125,000 rubles for shift work. This is incomparable with the Kazakh level, so some employees leave, and others demand higher wages. This directly affects production costs.

The third factor is the disruption of logistics chains due to sanctions and military actions. Many goods, feeds, and ingredients previously came through Russia; now, logistics have become more complicated and expensive. Some products have disappeared altogether, and delivery times have increased. All of this impacts production costs.

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, ups, and downs. We are currently in a phase of change, requiring farms to be more flexible.

How are farms increasing 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, it's necessary to increase income. Today, the fastest way is through the sale of breeding stock. Many farms have realized that this gives a sharp increase in profitability. Farms are also actively investing in genetics: modern lines produce significantly more milk.

Second, reduce expenses. Here, the key is the scale effect. If you increase yield while maintaining the same number of employees, the wage cost per liter of milk automatically decreases.

Third, do both simultaneously. I would especially emphasize feeding. No one composes rations based on old manuals anymore. Enterprises are switching to modern systems like CNCPS, NASEM, or DLG.

For me, a real breakthrough has been the 7CPS system. This model 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 major risks that require close attention.

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

Next is the labor shortage. Urbanization continues, with fewer people in villages. Plus, competition from Russia remains a huge challenge. Kazakh 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 can compete with us in our own market. Their scale and speed of development are enormous.

Bek+ is known for implementing modern technologies. Which innovations have given the best results?

— The most significant impact has been the transition to modern ration calculation systems, especially 7CPS.

Cow comfort also plays a colossal role. If feeding or watering norms are violated, no genetics or 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 are actively investing in robots, sensors, and digital platforms.

However, existing farms forced to take commercial loans at 20–25% are much more cautious about implementing innovations.

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 Kazakh farms on the international stage?

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

• loans at 2.5% per annum for 10 years;
• loan holidays;
• investment subsidies;
• subsidies for livestock purchases and for each liter of milk produced.

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 head is no longer a large farm. They are building for 2,400, 5,000, 6,000 head, and in the south, there is even a project planned for 10,000.

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 run?

— 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, and how to grow young stock so that there is enough 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 looming issue is the imbalance between production growth and processing capacity. Farms are growing quickly, but factories are slower. At some point, processors simply won't be able to accept all the milk, leading to the temptation to lower purchase prices. This will hit profitability and increase project payback periods.