Seoul Milk's potential financial support for farmers may lead to milk price hike

[Photo by MK DB]

South Korea’s No.1 dairy company Seoul Milk will provide funds to support its cooperative farmers this year, which may lead to a hike in the consumer price of milk and milk products. The fund size could reach around 30 billion won ($22.89 million), which may push up the crude milk price by 58 won per liter.

The financial assistance endorsed by a general meeting of Seoul Dairy Cooperative, the parent of Seoul Milk, on Tuesday reflects the management challenges in local farms suffering from skyrocketing feed costs.

Seoul Dairy Cooperative accounts for about 40 percent of the local white milk market and doubles as a livestock farmers union which is why its financial support is seen as a scheme to raise milk prices.

With the decision, milk companies are expected to purchase crude milk from dairy farmers for around 1,160 won per liter and considering a subsequent 10-fold increase in the retail price, the milk price in the market could go up to 500 won per liter.

When the crude milk price climbed 2.3 percent to 947 won from 926 won in August last year, Seoul Milk set the 1-liter price of white milk at 2,700 won in the following month, raising it by 5.4 percent.

It remains to be seen whether Seoul Milk will pass its support fund burden on to consumer prices.

“We cannot reveal the exact size of the support fund and there has not been anything decided yet regarding whether crude and retail milk prices will be raised,” said an official from Seoul Milk.

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