Dairy Farmers and Dairy Industry in 'Tug of War' Over Raw Milk Prices
Negotiations to Conclude by the End of This Month
Once Raw Milk Prices Are Set, Dairy Products Likely to Rise One After Another
Price Increases for Creams and Cheese Already Started This Month
[Asia Economy Reporter Song Seung-yoon] As negotiations on raw milk prices between dairy farmers and the dairy industry are expected to conclude within this month, prices of milk and other dairy products are anticipated to rise simultaneously as early as next month.
According to the industry on the 20th, the Raw Milk Basic Price Adjustment Negotiation Committee, composed of dairy farmers and dairy companies, agreed to complete the raw milk price negotiations by the 31st of this month. Originally, both parties had agreed to finish negotiations by the 15th, but due to differences in opinion, the talks broke down and the negotiation schedule was postponed once more.
It is reported that both sides have differing views on the extent of the raw milk price increase and the timing of its application. Since negotiations have been delayed since August, there are also conflicting opinions regarding the retroactive application of the price increase during this period. Typically, once the raw milk basic price is set, major dairy companies such as Seoul Milk, Maeil Dairies, and Namyang Dairy Products have successively raised milk prices. Usually, dairy farmers and companies start raw milk price negotiations in June and apply the new prices in August.
However, this year, the negotiations have not even taken place well past August due to ongoing conflicts over the dairy system reform plan, which involves changing the price determination system from the existing production cost-linked system to a differentiated pricing system by usage. Initially, dairy farmers strongly opposed the reform plan, but after several rounds of negotiations, they shifted to a cooperative stance, and the reform plan was passed at the Dairy Promotion Board meeting on the 16th of last month. Subsequently, raw milk price negotiations officially began on the 20th of the same month.
The industry expects that the new raw milk price increase will likely be decided between 47 and 58 KRW per liter. In this case, the consumer price of plain milk, currently in the mid-2700 KRW per liter range, could exceed 3000 KRW.
Price hikes are also expected to follow for other dairy products using raw milk, such as creams, cheese, and ice cream. Previously, Seoul Milk Cooperative raised the wholesale prices of some cheese products like cheddar cheese by about 20%, Namyang Dairy Products increased cheese products like Da Vinci by about 10%, and Maeil Dairies raised prices of sour cream and whipping cream by 6 to 7%. If prices rise again after this negotiation, some companies could see product price increases up to three times a year.
An industry insider said, "With the raw milk price increase combined with rising raw material costs and a high exchange rate situation, price hikes for dairy products are practically a foregone conclusion," adding, "Since several rounds of negotiations have already broken down and delays have been longer than expected, we are currently monitoring the situation closely."
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