The expansion of dairy herds in Russia and Kazakhstan after the import ban on Western food products

Self-sufficiency in dairy products is a central policy goal of the Russian government, as the ban on food imports from the West imposed by the Kremlin vividly demonstrated. Western export opportunities into the Eurasian Economic Union depend inversely on the growth of milk production within the Union. Against this background, we explore the evolution of herd sizes and the role of state support among commercial dairy producers in Russia and Kazakhstan between 2012 and 2015. We show that dairy farms did grow as long as they kept less than 70 cows. Less than 10% of our 180 randomly selected dairy farms received livestock-related subsidies. Regression analysis using an innovative simultaneous equation framework shows that subsidised farms were bigger and younger than their peers, although they usually did not belong to vertically integrated agroholdings. Our results suggest that broad-based herd growth will be stimulated if many farms receive small subsidies, not if very few receive individually large amounts. However, the effects of good management practice and access to milk marketing contracts were much bigger than the subsidy impact. Processors provided inputs or services to only 5% of farmers in our sample. 25 years after the end of central planning, structural change among dairy farms in Eurasia in many ways resembles the patterns observed in the West.