With falling farmer incomes and widespread milk shortages, the dairy crisis in Russia inspires a creative, collaborative solution.
By 2010, efficient dairy production in Russia had become an everyday challenge. Years of slow agri-business had triggered a cycle of limitations, starting with cow feed and leading to smaller yields per cow and a huge deficit in milk production across the country. Even with high consumer prices, the cycle of limitations continued.
With a network of feed customers in Russia, Cargill was well positioned to help solve the problem. The company determined that farm management issues and low-quality foundational diets were the root of the issue, leaving Russia with an average milk yield of 4,500 liters per cow, per year—remarkably low compared with the average of 7,000 liters in Europe and 10,000 in the United States. But the market’s volatility stopped initial efforts to address the problem.
To devise a new approach, Cargill teamed with Danone Company, the global leader in fresh dairy and Russia’s biggest milk buyer. This wasn’t the first collaboration between the two—Cargill and Danone worked together in 2010 in the US, establishing a series of new dairy sites and processing plants. Cargill looked back at the previous mutual venture for guidance, believing it was a success model that could be tailored to Russia’s unique circumstances.
The goal was to approach local, small-scale farmers as a unified business, working directly with rural dairy farms. Danone would help generate new cycles of agricultural stability, market competitiveness and profitability. Cargill played a part by providing high-quality feed and nutrition consulting services to help improve the efficiency of the farmers’ feeding programs.
The program first launched in 2012 with a pilot of 18 farms. Daily milk production quickly increased by 1.3 liters per cow per day, upping overall yield by 8%. Inspired by the instant progress, Cargill and Danone rolled out the project nationally, approaching farmers all across Russia.
But as Danone engaged farmers, the company was met with unexpected hesitation and resistance to change. The approach required farmers to abandon old techniques, embrace new technologies and adapt more sophisticated animal nutrition systems. Danone emphasized the benefits of improved income over feed costs, showing farmers how they could be more successful in the long term.
Eventually, their persistence paid off. After evaluating the new program’s quality-to-price ratio, Verbilovskoye Dairy Farm, a high-volume producer, reported a sizable increase in production—from 1.5 to 3.5 liters per cow per day after a one-year trial run.
“Farmers win by achieving better yields and higher incomes. Danone wins because they secure a steady supply of good-quality milk, and Cargill wins sales growth without the risk of payment defaults on the feed.”— Vitaly Akimov, Dairy Business Group Manager, Cargill Animal Nutrition Russia
Today, more than 55 (about 5%) of Russian farms participate in this innovative program. This represents a significant shift in attitudes, with farmers now implementing modern dairy technology. As a result, farmers’ incomes have increased, and progress is being made in this essential market.