Starting Next Year, Milk Price Determination System Changes... From Cost-Linked System to Usage-Based Differential Pricing System

[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Kim Hyewon] Starting next year, the system for determining milk prices will change from a production cost-linked system to a differentiated price system by usage, categorizing milk into drinking milk and processed milk with different prices.

The Ministry of Agriculture, Food and Rural Affairs announced that the Dairy Promotion Board held a board meeting on the afternoon of the 16th and unanimously approved a dairy system reform plan based on this content.

The government plans to form a working consultative body with dairy farmers, dairy companies, and others to prepare detailed implementation measures for the new system and conduct negotiations, aiming to implement it from January 1st next year.

The current production cost-linked system determines the price of raw milk based on changes in the production costs of dairy farmers. The government has viewed this system as only raising raw milk prices despite the decline in milk demand and has been promoting reform since August last year.

The differentiated price system by usage divides raw milk into drinking milk and processed milk, maintaining the current price level for drinking milk but setting a lower price for processed milk. The government’s position is that by introducing this system, the dairy industry will purchase processed milk at a cheaper price, lowering the prices of domestically produced processed dairy products and enabling them to compete against cheaper imported products. In the long term, it is also expected to increase the self-sufficiency rate of milk.

Kim Jungwook, Director of Livestock Policy at the Ministry of Agriculture, Food and Rural Affairs, said, "With this board resolution, the price competitiveness of domestically produced raw milk for processing will increase, leading to more market entry of processed dairy products," and added, "We expect that the variety of premium dairy products using domestic raw milk will increase, expanding consumer choices."

The Dairy Promotion Board will hold its first meeting on the 20th to start negotiations for setting the raw milk price this year. The negotiation committee will have an equal number of representatives from producers and dairy companies.

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