Crude Oil Base Price Increased by 49 Won per Liter... 52 Won Increase to Apply Until the End of This Year (Update)

As consumer prices continue to rise, there is an emergency alert on grocery prices. On the 19th, citizens are shopping at a large supermarket in downtown Seoul. Photo by Mun Honam munonam@

[Asia Economy Sejong=Reporter Kim Hyewon] From next year, the base price of raw milk will increase by 49 won per liter. The processed milk price will be set at 800 won per liter.

However, considering the prolonged price adjustment negotiations between producers and the dairy industry, an additional 3 won will be paid until the end of this year, applying a raw milk price of 52 won per liter.

The Ministry of Agriculture, Food and Rural Affairs announced on the 3rd that the Dairy Promotion Board resolved at its meeting to raise the base price of raw milk by 49 won to 996 won per liter starting next year. This is the largest increase since the implementation of the raw milk price linkage system in 2013. From January next year, the processed milk price will be set at 800 won per liter.

Considering that price adjustment negotiations were delayed and the adjusted price could not be reflected since August, the base price of raw milk from October 16 until the end of this year was set at 999 won per liter, an increase of 52 won.

The differentiated pricing system by usage, scheduled to be implemented in January next year, will be improved to better reflect farm production costs and market conditions.

In the past, even if there was an oversupply of milk, the base price of raw milk had to be increased within a range of 90-110% of the production cost increase. However, from next year, the negotiation range will be expanded to allow producers and the dairy industry to respond flexibly according to market conditions, and the system will be changed so that the base price of raw milk can be lowered even if production costs rise when there is an oversupply of raw milk. When raw milk is in surplus, the base price can be adjusted within a range of -30% to 70% of the production cost increase.

The processed milk price will consider the increase in operating costs but is designed to assess market conditions based on the difference between the processed milk price actually paid by dairy companies and international competitive prices, thereby enhancing the price competitiveness of domestically produced raw milk. If the difference exceeds 150 won per liter, the price can be lowered or slightly increased even if operating costs rise.

Incentive structures will also be adjusted to reduce farm production costs. Incentives paid based on milk quality will be expanded beyond fat and protein content and hygiene (somatic cell count and bacterial count) to include 'sanch'a' (the number of calvings before a dairy cow is culled) and incentives for farms participating in the dairy herd testing program (a program that evaluates the genetic ability of dairy cows by testing milk yield and milk components individually). This aims to increase the average number of calvings per dairy farm (currently 2.5) and improve dairy farm performance.

However, incentives for sanch'a and the dairy herd testing program will be applied after nationwide implementation conditions are established. For the time being, only fat and hygiene incentives will be applied as before. Additionally, by lowering the highest fat content bracket from 4.1% to 3.8%, the price received by farms will increase by 3 to 3.5 won per liter, and excessive feed input will be reduced, leading to an expected production cost reduction of more than 30 won per liter.

The Ministry of Agriculture, Food and Rural Affairs will improve the conditions for convening the Dairy Promotion Board meetings to require a majority of directors present and strengthen the resolution conditions from a majority of attending directors to a majority of directors present. It will also establish operating regulations for the executive recommendation committee, which were not stipulated in the articles of association, to enhance transparency in appointing the chairman, directors, and auditors. The articles of association agreed upon through the board will be implemented after approval by the Dairy Promotion Board general meeting and the Ministry of Agriculture, Food and Rural Affairs.

Kim Jungwook, Director of Livestock Policy Bureau at the Ministry of Agriculture, Food and Rural Affairs, said, "With this board resolution, the government's efforts to reform the dairy system have borne fruit," and added, "The government will diligently prepare all necessary measures to ensure the smooth establishment of the differentiated pricing system by usage to be implemented next year."

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