Russia’s dairy industry has entered a paradoxical phase. In 2025, the country achieved its highest raw milk production in three decades—34.3 million tons—yet by mid-2026, the sector faced falling prices, declining investment, and an oversupply crisis that has reshaped its trajectory. This is a story of impressive recovery colliding with structural imbalances.
Record Production and Self-Sufficiency Gains
The headline achievement is undeniable. Vice-Premier Dmitry Patrushev announced that milk production in 2025 reached 34.3 million tons, the highest in 30 years, with a target of 38.5 million tons by 2030. The Ministry of Agriculture confirmed an estimate of 34.3–34.5 million tons, noting that per capita consumption rose by 2 kg.
Commercial milk production—the volume actually processed and sold—grew to 26.7 million tons from 26.1 million in 2024. This expansion allowed processing enterprises to operate at full capacity, with positive dynamics recorded across drinking milk, butter, cheese, and cottage cheese.
Regional leaders drove this growth. Tatarstan produced 1.687 million tons, followed by Krasnodar Krai at 1.286 million tons, and Udmurtia at 1.037 million tons. The Volga Federal District increased volumes by 6.6%, though some regions like Leningrad and Novosibirsk saw declines of 2–7%.
Self-sufficiency levels vary dramatically by product. Russia meets 147% of its drinking milk needs and 101% of cottage cheese, but only 85% for butter and 76% for cheese. The overall self-sufficiency rate stands at just over 87%, below the 90% threshold set by the Food Security Doctrine.
The Cheese Conundrum
Cheese remains the industry’s structural weak point. Russia produces more than 900,000 tons of cheese and cheese products but imports another 300,000 tons. Per capita consumption is only 6.5 kg per year, with domestic production providing just 4.2 kg—about 60% of the rational consumption norm.
The Altai Region leads cheese production, with 20 regions accounting for over 78% of national output. However, many cheese-making regions face acute shortages of raw materials, while milk-producing regions lack the processing infrastructure to support cheese production. Resolving this would require an additional 1.2 million cows to increase milk output by 9.8 million tons—a formidable challenge.
The Oversupply Crisis of 2026
By mid-2026, the industry’s success had created new problems. A surge in milk production since autumn 2025 left supply consistently outpacing demand, triggering a sharp decline in farmgate prices. Average raw milk prices fell 23% year-on-year by April 2026, while production costs rose 6–16%.
Inventories of unsold cheese were 17% higher than a year earlier, and butter stocks rose 23%. New dairy business registrations plummeted 45% in the first five months of 2026, with only 109 new companies entering the market. The number of active dairy companies fell to 33,500 by June, down 26.4% year-on-year.
Investment conditions deteriorated sharply. Subsidized lending rates that once stood at 2–3% annually rose to 6.3–9.1%. Even Ekoniva, one of Russia’s largest producers, put investment projects on hold.
Trade Dynamics: Import Decline, Export Complexity
Russia’s dairy trade is heavily shaped by its relationship with Belarus. Imports fell to 6.6 million tons in 2025 from 7.1 million in 2024, with forecasts of 6.5 million tons in 2026. Belarus accounts for 94% of Russian dairy imports, with 100% share in categories like whey, cottage cheese, and permeate.
This dominance creates friction. Russian producers complain that Belarusian competitors are dumping products, particularly butter and fat-and-oil products, with 30,000 tons of butter sitting in Belarusian warehouses.
Export performance presents a mixed picture. Physical export volumes declined 5% to 1 million tons in milk equivalent, but revenue rose to $599 million from $521 million in 2024. Kazakhstan became the largest buyer at over $225 million, followed by Belarus at $86 million and Uzbekistan at $48 million.
The dry milk segment illustrates shifting dynamics. Whole milk powder production fell 25.2% in January–July 2026 as processors shifted to using raw milk directly, while skimmed milk powder production remained stable at 86,600 tons. Whey exports set a record, exceeding $20 million in the first eight months of 2025.
Structural Challenges: Herd Decline and Cost Pressures
Despite productivity gains—average milk yield per cow rose 4.8% to 8,937 kg in 2025—the national herd continues to shrink. The cow population fell 3% to approximately 7 million heads, with some estimates placing it at 6.9 million by February 2026. This represents a historical minimum for the post-Soviet period.
The cost structure is under pressure from multiple directions. In August 2026, the operational cost index for raw milk production rose 5.4% year-on-year, driven by a 7.7% monthly increase in diesel prices, higher electricity tariffs, and rising feed costs. The weakening ruble added further inflationary pressure.
Labour shortages and rising wages compound these challenges. The Soyuzmoloko association noted that farms face a shortage of human resources and salary growth, with some switching to other businesses.
Demand and Consumer Trends
Domestic consumption growth has slowed significantly. After strong demand in 2023–2024, the first quarter of 2025 saw demand fall by about 5%, with consumption only returning to prior levels by October. Soyuzmoloko’s general director described 2025 as “a transitional year.”
Consumer preferences are shifting toward functional products. Sales of high-protein yogurts and dairy desserts surged 52% in volume and 182% in monetary terms between July 2024 and June 2025. Demand for milkshakes grew 30% in early 2026. Meanwhile, traditional categories like drinking milk, kefir, and cottage cheese show slowing growth.
Survey data reveals that 82% of Russians consume dairy products at least weekly, with 30% doing so daily.
Outlook
The Russian dairy industry stands at a crossroads. The production achievements of 2025—record milk output and full processing capacity—have given way to a classic oversupply problem: too much milk chasing too few buyers, both domestically and internationally.
Soyuzmoloko forecasts exports recovering 8% to 1.1 million tons in 2026, but acknowledges this cannot absorb the entire surplus. The Ministry of Agriculture’s primary task for the year is ensuring stable prices and adequate producer profitability.
The sector’s long-term trajectory depends on several factors: whether investment can recover amid high borrowing costs, whether the national herd can stabilize, and whether export markets—particularly in Asia and the Middle East—can provide a sustainable outlet for growing production. For now, the industry is learning that success in production does not automatically translate into prosperity.
