South Korea will see a spike in milk prices amid worsening inflation
Dairy prices are expected to rise further as the price of locally produced milk is expected to increase to as much as 500 won ($0.36) per litre, industry sources said on Tuesday.
The Korea Dairy Committee, a private organization that oversees the fair distribution of raw milk, held the first meeting between dairy farmers and dairy companies on Tuesday to negotiate the price of raw milk for this year.
Even before the negotiation, the price of milk was expected to jump from 300 to 500 won to 2,700 to 3,000 won per carton.
Dairy farmers argued that they should raise the price of a liter of raw milk from 47 to 58 won since the cost of fodder for cows jumped 40 percent and other production costs also increased.
If the price of raw milk increases by 50 won per liter, the price of a carton of milk in the market would generally increase tenfold, sources said. In October 2021, when the price of raw milk jumped 21 won, Seoul Milk, the major dairy company, raised the price of a liter carton of milk by 200 won.
Dairy companies have accepted the price hike, citing rising production costs weighing on dairy farmers.
In August, Seoul Milk had already agreed to pay farmers more, from 1,110 won to 1,158 won per liter.
With milk becoming more expensive, it will likely push up the price of bread, ice cream and coffee, as well as butter, cheese, cream and other dairy products, adding to already rising inflation, have indicated sources.
In August, the price of processed foods jumped 8.4 percent year on year, outpacing the headline inflation rate, according to data from Korea Statistics.
The government promised on Monday that it would try to limit the rise in milk prices.
“We cannot give direct orders to dairy companies regarding prices. But we plan to ask them not to increase the price of milk, ingredients for other food products, as much as possible,” said Park Beom-su, deputy secretary of the Ministry of Agriculture, Food and of Rural Affairs, during a briefing on Monday.
Park pointed out that the price consumers pay for milk doesn’t always increase tenfold over raw milk, citing a previous example where milk prices rose as much as raw milk.
But dairy companies argue that higher market prices for milk are inevitable.
“We recognize that rising food prices are already pushing up inflation. Nevertheless, the industry needs to increase the consumer price of milk, following the rise in the price of raw milk, to offset the cost,” said a dairy company official who requested anonymity.
In the long term, rising milk prices could hurt the competitive edge of domestic dairy companies, sources said.
From 2026, South Korea will impose zero tariffs on milk imported from the United States and Europe. Current tariff rates for US and EU countries are 9.6% and 9% respectively.
Even before the tariff waiver, the list of the country’s top 10 sterilized milks included milk brands from Poland and Germany – but not Korea – as of Monday, according to online tracking firm Danawa.
By Byun Hye-jin ([email protected])