Urgent 'Milkflation'... Government Launches Dairy Industry Development Committee to Respond

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The prices of major ingredients frequently appearing on ordinary people's dining tables continue to rise, which is expected to increase the burden of preparing holiday meals for Chuseok, now just a month away. Citizens shopping at the Nonghyup Hanaro Mart Yangjae branch in Seocho-gu, Seoul, on the 17th. Photo by Kim Hyun-min kimhyun81@

[Sejong=Asia Economy Reporter Moon Chaeseok] The government has decided to form a public-private Industry Development Committee to promote the long-term development of the dairy industry. The rationale is "long-term response to changes in consumption patterns," but criticism has arisen that the government only took action after concerns about "milkflation" (milk + inflation), which means a significant increase in dairy and food prices, escalated. The government plans to present specific institutional improvement measures to increase domestic raw milk production and self-sufficiency rates by the end of the year.

The Ministry of Agriculture, Food and Rural Affairs announced on the 25th at 2 p.m. that it will hold the first meeting of the "Dairy Industry Development Committee" at the Sejong Convention Center. The meeting will discuss the current state of the industry, the necessity of institutional improvements, and the committee’s operational plans. The government judged that it must directly intervene to solve structural problems such as increasing dairy consumption and imports while domestic raw milk self-sufficiency rates decline. Looking at the list of 19 committee members, Park Youngbeom, Vice Minister of the Ministry of Agriculture, Food and Rural Affairs, will serve as chairman, with balanced participation from producers, demanders, consumers, and academia. Here, the demand side refers to dairy companies such as Seoul Milk, and the consumer side refers to consumer organizations such as the Korea Consumer Agency.

According to the Ministry of Agriculture, Food and Rural Affairs, compared to 2001, dairy consumption surged by 46.7% (3.046 million tons → 4.47 million tons) and imports by 272.7% (653,000 tons → 2.434 million tons) last year. During the same period, domestic raw milk production decreased by 10.7% (2.339 million tons → 2.089 million tons), and the self-sufficiency rate dropped by 29.2 percentage points (77.3% → 48.1%).

The problem is that it is difficult to devise solutions for the cause of "domestic raw milk price increases." Over the past 20 years, raw milk prices in Europe and the United States rose by 19.6% and 11.8%, respectively, while in Korea they increased by 72.2%. According to Statistics Korea, the consumer price index for food and non-alcoholic beverages in the second quarter rose 7.3% compared to a year earlier, and the prevailing analysis is that raw milk price increases affected dairy and food prices.

The Ministry of Agriculture, Food and Rural Affairs diagnosed that it is difficult to respond to issues such as the high entry barriers for new personnel due to the industry characteristics of the quota system and production cost linkage system, and the large demand-supply gap caused by the structure where raw milk prices are set regardless of market conditions.

Moreover, although a public-private Dairy Promotion Subcommittee has been operating for the past year, institutional improvements have been difficult due to passive participation from producers. Among the 15 members of the Promotion Committee, 7 are producers, and among the 4 members of the general assembly, 2 are producer directors, so if they cast opposing votes, structural progress in discussions is difficult. A Ministry of Agriculture, Food and Rural Affairs official said, "(Ultimately) for the sustainable development of the dairy industry, the government needs to take the lead in encouraging participation and gathering opinions from various fields such as producers, demanders, academia, and consumers to promote institutional improvements."

The government announced that by the end of the year, it plans to present specific improvement measures regarding ▲ raw milk price determination and transaction system improvement ▲ production cost reduction and production structure transformation ▲ government financial support and research and development (R&D) improvements ▲ and restructuring of the Dairy Promotion Committee’s decision-making system. It said it will support committee discussions through research projects and operate a "Practical Task Force for Institutional Improvement" that adds a 9-member expert advisory group to the 19-member committee to produce results.

List of the Dairy Industry Development Committee. (Source: Ministry of Agriculture, Food and Rural Affairs)

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