Korea National Council of Consumer Organizations

On August 1^st, 2013, the Korean government introduced the raw milk indexation system, in which the current year’s milk price is adjusted if the variation in the milk production cost is at least ±4% compared to the previous year. Otherwise, the price is adjusted every two years by referring to the milk production cost and the inflation rate announced by the Statistics Korea every year. Discussions between the dairy farmers and producers have been taking place since May. The former group insists that the raw milk price should be increased by 21-26 won/liter, because production cost has increased by 3.1% (24 won/liter) – from 767 won/liter in 2017 to 791 won/liter in 2019.Meanwhile. the latter group wants the prices to be frozen, or ideally lowered, as it struggles with a huge drop in demand due to the coronavirus pandemic. The two sides are yet to find common ground. Furthermore, farmers do not have any reason to reduce raw milk production, since the raw milk indexation system only adjusts the price based on fluctuations in the production cost regardless of the situation in the market.

According to an announcement from the International Farm Comparison Network (IFCN), the world milk price has dropped by 4.6% this year as COVID-19 slows down the demand growth, while two large countries, the US and India, showed decreases of 29% and 19%, respectively. In Korea, all industries and consumer spending have been drastically disrupted by COVID-19. The dairy industry is estimated to have seen sales shrink by about KRW 33.4 billion, as schools were closed during the coronavirus pandemic, while they also have to pay to deal with the more than 15% or raw milk that has remained unsold. The most important thing is that, when the raw milk price increases, the consumer price significantly increases, taking into account the costs and margins of the manufacturers and distributors; however, nobody listens to the consumer opinion during these discussions. Putting a greater burden on the consumers with the increase in the production costs is not justified, while the farmers and producers are simply fighting over their own interests. As everyone is suffered from the massive economic recession resulting from COVID-19, the prices of dairy products will of course continue going up if the price of raw milk rises. The negotiations will be concluded on June 30^th (Tue).