Government "Forcing Introduction of Differential Pricing System for Milk by Usage... Dairy Promotion Board Restructured from 15 to 23 Members"

Briefing on Dairy Industry Development Policy Directions on the 30th

Urging Producers to "Consider Future Generations 20-30 Years Ahead"

On October 15th, a customer selecting a product at the milk section of a large supermarket in Seoul. Photo by Mun Ho-nam munonam@

[Sejong=Asia Economy Reporter Moon Chaeseok] As the government's plan to reform the raw milk price system, which affects milk prices, is expected to extend beyond the new year contrary to the government's intentions, the government sent a message to producers (farmers) on the 30th urging them to "participate in the system reform." The government asked producers to "not only focus on immediate profits but also thoroughly consider creating a desirable dairy industry ecosystem to pass on to future generations 20 to 30 years from now." It also emphasized the necessity of structural reform, noting that among the 15 board members of the Dairy Promotion Council who hold decision-making authority, 7 are from producer organizations, and if all oppose, smooth discussions would be difficult. This is interpreted as the government’s intention to proceed with the original plan without accepting producers' demands.

The Ministry of Agriculture, Food and Rural Affairs (MAFRA) emphasized this in its briefing material titled "Policy Directions for Sustainable Dairy Industry Development" released that day. It reiterated that the differentiated pricing system by raw milk usage will continue to be pursued and that the decision-making structure of the Dairy Council must be changed. The government recalled that the domestic dairy industry has been shrinking for 20 years, with the self-sufficiency rate of domestic raw milk sharply dropping from 77.3% in 2001 to 48.1% last year. The cause is that the production structure has not kept pace with the consumption structure, which is attributed to the price difference between drinking milk and processed milk (used as raw materials for cheese, butter, ice cream, etc.), with the pricing system currently aligned mainly with the more expensive drinking milk. Accordingly, the government proposed a reform plan to maintain the drinking milk price at the current 1,100 KRW per liter but lower the processed milk price by 200 KRW to 900 KRW per liter. Producers have opposed this, resulting in a stalemate. Additionally, the decision-making structure requires at least two-thirds (10 out of 15) approval, but since all 7 producers oppose, the government argues that this structure must be changed.

According to MAFRA, since August, a "Dairy Industry Development Committee" chaired by the vice minister and including academia, consumer groups, producer organizations, and dairy companies was formed, and five rounds of consultations were held until the 28th. While all parties except producers agreed on the price system and decision-making structure reform, progress has stalled due to producer opposition, MAFRA explained. Producers oppose the government policy on the grounds that ▲increasing production is difficult, so the policy would effectively reduce quotas, and ▲ultimately, dairy farmers' incomes would decrease. They advocate for introducing a nationwide MMB (Milk Marketing Board) centered on producers, where producer representatives negotiate prices and volumes with all dairy companies, instead of the differentiated pricing system by usage. They argue that the MMB system is more rational to guarantee production autonomy.

MAFRA refuted these producer arguments point by point. It stated, "Contrary to the producers' claim that only drinking milk purchase volume counts as production, including processed milk production of 310,000 tons would increase total production from 2.05 million tons to 2.22 million tons, meaning quotas would actually increase." Regarding the claim that increasing production is difficult due to current livestock density regulations, MAFRA said, "As of this month, the legal area required for 401,000 dairy cows is 4.3 million square meters, whereas the permitted area for dairy farm facilities is currently 10.73 million square meters, indicating sufficient capacity for production increase." On the claim of income reduction for dairy farmers, MAFRA explained, "According to the ministry's plan, although the purchase price of processed milk will be lower than drinking milk, the ability to produce and sell more volume is expected to increase farmers' income." Regarding the MMB introduction, MAFRA responded, "Since the Dairy Promotion Council currently manages quotas and determines purchase prices, the introduction of MMB is not an urgent issue to decide immediately. The ministry plans to review the role and function of the Dairy Promotion Council and the introduction of MMB as part of mid- to long-term dairy industry development plans."

To reform the Dairy Promotion Council's decision-making rights, MAFRA proposed ▲expanding the number of directors from the current 15 to 23 and adding neutral members (government representatives from 1 to 3, academia from 1 to 3, consumer representatives from 1 to 3, and adding one lawyer and one accountant) and ▲introducing a personnel recommendation committee system for appointing outside directors. It emphasized that during operations, "decisions should be strengthened according to the democratic majority principle to prevent situations where discussions cannot even proceed due to opposition from one side." This means that the practice of shutting down discussions when all 7 producers vote against cannot be tolerated any longer.

MAFRA stated that it plans to continue consultations with producer organizations and the dairy industry regarding price and decision-making structure reforms. To this end, it will hold on-site briefings for dairy farms by region and meetings with consumers and the dairy industry. It also plans to promote measures such as expanding import quotas for forage, increasing funds for farm feed purchases, expanding support for facility modernization, and increasing support for manure treatment for dairy farms to reduce production costs. Regarding distribution structure improvements, it plans to conduct a research project next year and develop improvement measures through stakeholder discussions. Kwon Jae-han, Director of Food Industry Policy at MAFRA, said, "For the dairy industry to become a sustainable industry, change and innovation throughout the dairy industry are inevitable," and urged, "Both dairy farmers and dairy companies should not only focus on immediate profits but also thoroughly consider creating a desirable dairy industry ecosystem to pass on to future generations 20 to 30 years from now."

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