Herd Growth, Farm Organisation and Subsidies in the Dairy Sector of Russia and Kazakhstan

Initially taken as a template for farm restructuring after the demise of collective agriculture, the ‘Western family farm model’ has taken root in the former Soviet countries only belatedly and incompletely. We examine dairy structures in Russia and Kazakhstan and analyse the drivers of recent herd growth. We are specifically interested in the role of farm management and organisation, vertical integration, and the role of policy. Regression analysis based on a sample of 180 randomly selected commercial dairy farms, using an innovative simultaneous equation framework, shows that better herd management and access to milk marketing contracts were more effective in stimulating herd growth than current subsidy payments. We do not find evidence that milking plants belonging to corporate entities or even supra‐regional agroholdings grow more substantially than medium‐sized individual farms. Twenty‐five years after the end of central planning, structural change among commercial dairy farms in Russia and Kazakhstan appears similar in many ways to the patterns observed in the West more recently: smaller farms catch up in terms of herd growth and classical family‐run operations coexist with or even emulate vertically integrated agribusinesses based on hired labour. In moving toward this ‘new normal’ of farming structures, commercial dairy farms in Russia may even be a few steps ahead of their Western counterparts. At the same time, the still sizeable but stagnating group of subsistence producers in rural households finds no equivalent in the West.