Government to Proceed with Dairy System Reform Including Differential Pricing by Use Despite Opposition from Dairy Farmers

[Asia Economy Sejong=Reporter Kim Hyewon] The government and local governments have expressed their consensus on the necessity of reforming the dairy system centered on the introduction of a differentiated pricing system by usage and have shown their determination to confront the opposition from dairy farmers head-on.

On Sunday the 10th, the Ministry of Agriculture, Food and Rural Affairs held an emergency meeting with local governments and dairy-related parties to discuss promoting institutional reforms such as a differentiated pricing system by usage for the sustainable development of the dairy industry. Kim Injoong, Vice Minister of the Ministry of Agriculture, Food and Rural Affairs, said, "The current production focused on drinking milk cannot guarantee the sustainability of the dairy industry, so it is necessary to expand the processed dairy product market," adding, "Despite opposition to institutional reforms such as regional rallies by the Korea Dairy and Beef Farmers Association, we will steadfastly push forward with reforms of the dairy system, including the differentiated pricing system by usage."

The government’s assessment is that if the current situation continues, the future of the dairy industry will not be sustainable. Domestic raw milk production decreased from 2.34 million tons in 2001 to 2.03 million tons last year. During the same period, imports increased from 650,000 tons to 2.51 million tons. The self-sufficiency rate of domestic raw milk dropped from 77.3% to 45.7%. While per capita milk consumption decreased from 36.5 kg to 32 kg, total dairy product consumption, including processed dairy products using imported raw materials such as cheese, butter, and ice cream, increased from 63.9 kg to 86.1 kg.

In this context, the alternative proposed by the government since last year through the 'Dairy Industry Development Committee' is the differentiated pricing system by usage. Raw milk used for drinking milk will be priced at a level similar to the current one, while raw milk used as processing material will be priced lower than drinking milk to compete with imports.

Most countries worldwide apply different raw milk prices depending on its usage, but in Korea, raw milk prices are determined solely based on dairy farmers’ production costs and set as a single price for drinking milk. Since companies find it difficult to produce processed dairy products at the high drinking milk price, they inevitably rely on imports for raw materials used in processed dairy products. To improve this, the Ministry of Agriculture, Food and Rural Affairs has prepared a plan to apply different prices for raw milk by distinguishing between drinking milk and processing milk, reflecting not only production costs but also demand changes, dairy farmers’ income, and international competitiveness in line with the Dairy Promotion Act.

The Ministry plans to determine the quantities of drinking milk and processing milk so that dairy farmers’ income does not decrease with the implementation of the differentiated pricing system by usage and will also support budgets to encourage dairy companies to expand purchases of processing milk.

The Ministry expects that with the introduction of the differentiated pricing system by usage through the dairy system reform, dairy farmers’ income will increase, and the production structure overly concentrated on drinking milk will improve. It also anticipates that imported raw materials for processed dairy products used by dairy companies will be replaced by domestic products, increasing domestic production and improving self-sufficiency.

However, the Korea Dairy and Beef Farmers Association is reportedly opposing the dairy system reform and organizing regional rallies. The Ministry’s proposal to hold joint regional explanatory meetings with the government and the association has also been rejected. Vice Minister Kim emphasized, "The association’s claim that the introduction of the differentiated pricing system by usage means quota reduction is not true," adding, "Quotas are not guaranteed by the system but are traded autonomously in the market, so the government cannot arbitrarily reduce them, and we have never presented any plan to reduce quotas."

Along with the introduction of the differentiated pricing system by usage, the Ministry of Agriculture, Food and Rural Affairs plans to create a sustainable dairy industry in the long term through measures such as reducing production costs, supporting research and development for premium dairy products, and improving the milk distribution structure.

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