Pressure mounts on milk producers to cut prices

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The Ministry of Agriculture, Food and Rural Affairs recently met with South Korean dairy companies in a bid to increase the pressure on them to minimize price hikes for milk, according to Food Ministry Wednesday.

According to a Food Ministry spokesperson, the Food Ministry asked Korean dairy companies during a closed-door meeting to minimize price hikes for milk that are expected to take place amid a forthcoming surge in the price of raw milk.

Currently, Korea Dairy Committee, a private organization in charge of distributing raw milk, is reviewing a plan to increase the price of raw milk starting around August amid overall increases in labor and cow feed costs.

Price hikes for milk products in the latter half of the year are inevitable if the price of raw milk rises, say local dairy company officials.

"Costs for raw milk are the most important factor in determining the price of milk (the end product)," said an official from local dairy company on the condition of anonymity.

"If the price of raw milk is increased starting in August, we will have no choice but to increase the price of milk," he said.

Despite the forthcoming price hikes for milk, the Food Ministry spokesperson added that this year's "milkflation" is not expected to be as steep as last year's, as the Food Ministry has newly implemented a policy starting this year to prevent an excessive surge in milk prices, by setting a price hike limit.

Until last year, milk companies were allowed to raise their prices for raw milk by 104 won (8 cents) to 127 won per liter. However, with the new policy, as of 2023, milk companies are now only allowed to raise their prices for raw milk by between 69 won and 104 won per liter.

"Even if dairy companies raise their prices by the highest rate, which is 104 won per liter, that would be the same as last year's lowest rate of increase," said the Food Ministry official.

If the rate by which raw milk is allowed to be increased goes from 69 won to 104 won, the price of raw milk itself is expected to rise from 1,065 won to 1,100 won per liter. The price of raw milk currently stands at 996 won per liter.

When the price of raw milk rose by 49 won (5.1 percent) per liter last year, major dairy companies such as Seoul Milk, Maeil Dairy and Namyang Dairy raised their milk prices on average by 6.6 percent, 9.6 percent and 8.6 percent, respectively.

Dairy companies say they feel the pressure to curtail the rates by which they have been raising milk prices.

"Following ramen, the confectionery and baking industry has lowered the prices of some products, so we have no choice but to be on high alert about the issues raised by the government," said the official from local dairy company.

"Before the government asks the dairy industry for cooperation, inquiries should be directed to dairy farmers to reduce increases in raw milk prices so that the possibility of curbing milkflation can be improved," the official said.

The Food Ministry called in officials from milling companies on June 26 and asked them to lower the prices of wheat as international wheat prices have been falling this year.

A slew of the nation’s top ramen makers, including Nongshim, have since cut the prices of their most popular instant noodle products by an average of some five percent.

By Lee Yoon-seo(yoonseo.3348@heraldcorp.com)