'Will Milk Prices Be Controlled?' This Year's Price System Reform... Dairy Industry Opposition (Comprehensive)

Ministry of Agriculture, Food and Rural Affairs and Dairy Industry Development Committee, Improve Price Determination and Transaction System

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[Sejong=Asia Economy Reporter Moon Chaeseok] As crude oil prices rise, dairy product prices have also increased, prompting the government to declare that it will establish a price determination participation system, including reforming the crude milk price linkage system, within this year. The government plans to revise existing systems such as the production cost linkage system and quota system to create a new price determination framework. The livestock industry is strongly opposing this, accusing the government of abusing its authority.

Dairy Consumption Increases While Domestic Self-Sufficiency Rate Drops Sharply

The Ministry of Agriculture, Food and Rural Affairs announced on the afternoon of the 25th that it will hold the "Dairy Industry Development Committee" at the Sejong Convention Center in Sejong City. In the first meeting, the current status of the dairy industry, the need for system improvement, and the committee's operation plan will be explained and opinions collected.

Dairy product consumption increased from 3.046 million tons in 2001 to 4.47 million tons last year. Imports rose by 272.2% during the same period to 2.434 million tons last year, while domestic raw milk production decreased by 10.7% to 2.089 million tons, causing the self-sufficiency rate to fall by 29.2 percentage points to 48.1%.

The Ministry diagnosed that domestic raw milk prices rose significantly more than in major countries, leading to a decrease in domestic production. Looking at the crude milk price fluctuations over the past 20 years, Korea's prices increased by 72.2%, which is a larger rise compared to Europe (19.6%) and the United States (11.8%).

Currently, the quota system (2.2 million tons as of last year), which guarantees stable milk supply, and the linkage system, which determines prices by reflecting changes in milk production costs, are applied. The Ministry judged that the quota and linkage systems do not reflect market supply and demand conditions, raising concerns about oversupply, and that guaranteed prices lack factors to strengthen competitiveness.

Kim Injung, Director of Food Industry Policy at the Ministry of Agriculture, Food and Rural Affairs, analyzed, "The factors determining raw milk prices are centered on production costs and fail to consider many other elements. When considering whether our current raw milk price determination system functions to regulate supply and demand, it tends to exacerbate oversupply."

Although the Dairy Promotion Association, which includes producers, consumers, experts, and demanders, has been operated for the past year to discuss system improvements, its effectiveness has been limited. The Ministry views this as a structural problem because if producers oppose, the board of directors cannot be convened, making it difficult to advance discussions.

System Improvement Through Research Service by Year-End

The Ministry plans to promote system improvements led by the government through the committee. The committee includes related ministries, academia, consumers, producers, demanders, and related organizations. An advisory group of experts and a working group for system improvement, led by the Director of the Livestock Policy Bureau, will also be operated.

The committee will discuss improvements in raw milk price determination and transaction systems, reduction of production costs and structural transformation, government financial support and research and development (R&D) improvements, and reform of the Dairy Promotion Association's decision-making system. The final plan for system improvement will be prepared by year-end through expert research services.

Currently, incentives are provided based on fat and protein content in raw milk, but lowering raw milk prices by converting the fat content standard is also under consideration. Director Kim explained, "Most farms produce milk containing about 3.9-4.0% fat, which inevitably increases production costs. Adjusting and converting the fat content standard to 3.5% is also a topic for discussion."

The livestock industry strongly opposed the government's plan to participate in raw milk price determination. The Dairy Promotion Association has already raised the raw milk price from 926 won per liter to 947 won per liter by 21 won starting this month.

Regarding this, Director Kim said, "Although conflicts or clashes occurred during the milk price negotiation process, this is only part of the comprehensive picture the committee aims for. Through sufficient discussion in the process of preparing various policies for dairy industry development, conflict factors can be minimized."

This content was produced with the assistance of AI translation services.