How to create a Closed club of manufacturers of milk for public money

Источник: The DairyNews
Last week SOYUZMOLOKO has finally published the Program of development of dairy cattle breeding, which was developed over several months. The program contains two sensible proposals. The first one is the creation of the system of cattle identification. Secondly, it is the establishment of breeding associations by the cattle breeds with all the ensuing consequences, including the granting of breeding status not to the farm, not to its manager but to the animal.
Mikhail Mischenko, Director of Research Center of Dairy Market

The first item will:

  1. Finally take into account all the cattle and put an end to the state's insinuations regarding the presence of cattle on small private farms.
  2. Create the ability to monitor the turnover of agricultural animals.
  3. Occupy the wandering hands of the officials of the Rosselkhoznadzor, who not knowing what would be useful to do, try to take over the functions of the CPS and dump illegal lists and checks on manufacturers of dairy products. By the way, it is worth mentioning that the Program SOYUZMOLOKO does not say a word about the Rosselkhoznadzor, and functions on the animal identification are assigned to the Ministry of agriculture. We assume this is a minor error. Moreover, there are points in the program which cause more serious issues and even fears.

The second item (the creation of breeding associations by breeds) is a step towards the end of state monopoly and a few hangers-on that guide financial flows in breeding business into their pockets.

Speaking about the program of livestock breeding development as a whole, its logic, philosophy, goals and objectives raise serious questions and even concerns. To sum up in two words we can define the program as an attempt to create a closed club of manufacturers of milk for public money. And not a private club of owners of breeding cattle, but namely milk producers.

I will explain.

1. Closure. The program itself (like so much in the depths of SOYUZMOLOKO) was created with restricted access of market participants. There was the PR campaign, but in reality only a narrow circle of representatives of the market took part in the development of program design. Even the media was not allowed; otherwise it could create further discussion among industry participants.

What is the result?

Among the developers only 5 of the milk producers are stated – “EcoNiva”, "Damate", "Green Valley", Agrofirma “TRIO”, Concern "Detskoselsky". We could add another three associations: the Association of manufacturers of the cattle of Holstein breed (yet, unfortunately, it is limited to a few farms in the Volga area), SOYUZMOLOKO (in fact it is the same Damate EkoNiva, Green Valley and TRIO) and The National Breeding Union (these are the breeding monopoly of the market).

Is that enough? No. Even if we talk about large milk producers, there are much more of them than mentioned above and not always their opinion coincides with the opinion of SOYUZMOLOKO.

Does this express the majority opinion? No. I would like to remind that according to the Research Center of the Dairy Market, there are more than 33 thousand farms with an average herd of 133 cow in Russia. And 2/3 of them are considered to be private farms.

Was there a real public discussion of the program? No. During the development of the program, the participation of mass media (first and foremost, The DairyNews as the main critic of SOYUZMOLOKO) was not allowed. Broad professional public has not had the opportunity to get acquainted with the course of development and discussion of the document.

What did we get as a result? Program. Not the draft program, but the ready program. It means that any other opinion is not taken into account. Too late. If SOYUZMOLOKO didn't pick you as a participant in their closed meetings, if your point does not coincide with the one of SOYUZMOLOKO, or, say, with one of "Damate", if you have not paid KPMG services, then you will have to agree with what you are offered.

What you - we – are offered?

2. The goals and objectives.

I admit that the representatives of SOYUZMOLOKO and dairy holdings may not know how to formulate goals and objectives properly. But I don’t have any doubt that the experts of KPMG know how to set a goal! GOAL! And not purposes. There should be one goal. Always! It is an absolute rule of any business process. Students are taught this in the first year. In our "Program" three are purposes:

1. To increase production output and improve the quality of breeding products.
2. To increase the level of self-sufficiency with domestic breeding material to ensure food security of the country.
3. Russia's integration into the international system of breeding and improving the competitiveness of domestic breeding products in foreign markets.

If it is summarized, the goal of Program's increasing the efficiency of dairy cattle breeding in Russia is to increase the efficiency of dairy cattle breeding in Russia.

That is, we must work for the sake of working.

Let's try to understand why we need to improve the efficiency of livestock breeding? In my opinion (and I think I'm not alone) the target of any business is making money. A healthy business earns money from sales of their products and services. Unhealthy - from grants and various financial frauds (it’s clear that Mr. Danilenko - Chairman of the Board SOYUZMOLOKO - with experience in the ruin of several dairy production units, never put the purpose to earn money by sales, but still...).

Dairy farming as a production unit and breeding livestock as a part of it - makes money from the sale of raw milk to processing companies (the milk must be recycled and sold to the final consumer or as an ingredient for further processing). Accordingly, there should be plenty of milk, besides, it should be of high quality and have a competitive price (that is, it must compete on price with the milk produced in other countries, and meet the payment expectations of the end user).

Breeding livestock as a part - only a part – of an industrial complex should provide growth of quality milk production in Russia with the best performance for protein and fat composition, it should be able to compete on a price on the global markets. Creating conditions for the growth of such milk production should be the goal of the program. It should be, but it is not.

Objectives derive from goals. I will not list them all, but the main ones are the creation of accessible and affordable genetic material (seeds, embryos, heifers, etc.), improvement of milk quality parameters, size increase of breeding cattle, increase longevity of the cattle, etc. But the identification and establishment of associations by breed is only a tool.

Let’s come back to the goals. We see that the goals are blurred. Why? I admit that real goals are different. But why?

3. Philosophy and numbers.

That's the key of the "Program". The whole philosophy of the program is revealed here, in this picture and in the table of key performance indicators of the program.

The picture clearly shows that there are two ways to increase milk production (according to developers): the intensive way through the increase in lifetime productivity and the extensive one - through the increase in the number of cattle, which entails, of course, the increase in the number of farms and the increase in the average size of the herd.

The growth in the number of farms is not our way.


Since 80-ies of XX century Russia has lost 75% of the number of cows. In the result, besides the direct loss of the dairy market we got a huge area of uncultivated land, especially in the Nonchernozem zone, and drunken population that lost interest in agriculture.

The Program of development of the efficiency of dairy cattle breeding offers further reduce of the population from 7.3 million head (though this figure is incorrect - the real number without regard to smallholders, according to the Research Center of the Dairy Market makes 4.5 million head) to 5.3 (as I understand it, is also including smallholders), that is by 25%!

The increase in the number of farms is not considered as a possible promising way of milk production development.

The social value of this plan is difficult to overestimate: the withdrawal of 2 million head from the production (even from the number of inefficient farms) would reduce the number of the employed rural population not less than 500 thousand people. They are the people who are, in the opinion of the program developers must either become an inveterate drunkard, or leave the countryside.

But the production of raw milk according to the logic of the Program should increase through the growth of the average production from 29.2 million tons to 33.9 million tons, i.e. by 16%.

Thus, assuming a steady annual increase in production of raw milk by 3% due to the extensive growth of livestock, current yields and the increase in the number of farms, the amount of milk produced will make 39 million tons of milk by 2025.

That’s all!!!! You may stop reading the program now!

Because it is not so interesting to know how it turns out that the state will need to spend 11.2 billion rubles on the creation of the animal identification system. Because normally, the identification system is a source of revenue for the state. For example, when you register your car, receiving a registration plate is a paid service. Why should not the cattle bring income to the state?

And it is not interesting to know why the state must pay 6.7 billion rubles on the creation of associations by breeds. As I understand it, the Association by breeds is a non - profit organization, that should be financed by business directly.

And it is not interesting to know on what "innovative technologies" the state has to spend 20.5 billion rubles.

It is not interesting to know all this because the essence of the program is as follows: the state should allocate about 40 billion rubles for 9 years to finance the reduction of cattle on 2 million animals.

I do not understand why you cannot increase the number of cows, increase milk production and increase genetic potential at the same time. Though, it is clear.

The real purpose of the program is very simple: the concentration of production, reduction of constituent entities of government support and the concentration of this support in the hands of those who remained. That is, the creation of such a club of milk producers. This is a private club. The club, whose members want to sell their milk expensively, having the advantage of state support.

Let’s come back to the figures.

With properly built herd management the annual increase in the population should be approximately 5%. It is important to provide animals with feeding and housing conditions, and to ensure their implementation. That is, the annual growth of milk production without the development of milk production may be easily created without any additional funding. And if we work on the milk yield, the growth may accelerate. It is important only to sell milk. And this milk must be competitive in quality and price. And especially for this purpose genetics should develop - in order to reduce the production cost of raw milk, making easier access to breeding material for producers, increasing yield of dry matter in milk, adapting cattle to housing and feeding conditions.

SOYUZMOLOKO refers to certain experts from New Zealand, USA, Canada, the Netherlands, etc. For reference, the average milk yield per cow in New Zealand does not exceed 4.6 tons per year. And no one is going to increase this figure. Taking to account the population of New Zealand there are too many cows there: 3.5 million animals per 3.5 million people. It is actually very simple: we have very few cows.

We should have more cows. And it is clear that in the Netherlands there is a struggle for every gram of the milk produced, because there is no other way to increase production. There are 38 cows per 1 km2. But in Russia there are only 0,3 cows. And even in our largest dairy region - Tatarstan – there are 3.7 cows per 1 km2. It is less than in the Netherlands, Pakistan, India, New Zealand, Belgium, Ireland, Switzerland, Denmark, Germany, Kenya, UK, Belarus, Tanzania, Poland, Turkey, France, Austria, Italy, Israel, Egypt, Lithuania, the Czech Republic, and Ecuador.

That is all, in fact!

Editorial opinion may not coincide with the opinion of the author

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