As declining birth rates and changing dietary habits exacerbate the drop in white milk consumption, negotiations between dairy farmers and the dairy industry over the reduction of drinking milk quotas for next year are facing significant challenges. Both sides agree on the need for a reduction, but they have been unable to narrow their differences regarding the standard quantity, leading to ongoing discussions as the end of the month deadline approaches.
According to the Dairy Promotion Association on August 26, a subcommittee involving producers and the dairy industry is currently negotiating adjustments to the milk quotas for different uses for 2027-2028. The negotiations, which began on June 30, were initially expected to conclude by the end of July, but have been extended to the end of this month due to a lack of agreement.
The crux of the negotiations is determining how much to reduce the drinking milk quota. Under the differentiated pricing system, raw milk is categorized into drinking milk and processed milk, which includes cheese and powdered milk. The current standard drinking milk quota is set at 1.941 million tons annually. While both the dairy industry and farmers agree on the need to reduce this quota, they differ on the baseline quantity for calculating the reduction.
The dairy industry argues that the reduction should be based on the current standard of 1.941 million tons. In contrast, farmers contend that the baseline should reflect the actual purchases made by dairy companies last year, which amounted to approximately 1.89 million tons. This creates a discrepancy of about 50,000 tons between the standard quota and actual purchases.
Applying the proposed reduction rates discussed by both sides would widen this gap even further. If the excess milk produced (1.797 million tons) is excluded, and the excess reduction rate (10-30%) is applied, the dairy industry’s proposed baseline would require a reduction of approximately 14,400 to 43,200 tons. Under the farmers' proposed baseline, the reduction would be lowered to about 9,300 to 27,900 tons. Depending on the reduction rate, the difference in the quantities each side advocates could reach as much as 15,300 tons.
The need for a reduction has become more pressing due to the prolonged decline in white milk consumption. According to the Dairy Promotion Association, per capita consumption of white milk in the country fell to 22.9 kg last year, down 2.4 kg from 25.3 kg the previous year. Compared to 27 kg in 2016, this marks a decrease of 4.1 kg over the past decade. The decline is attributed to a shrinking consumer base of infants and school-age children due to low birth rates, coupled with changing dietary habits.
The dairy industry argues that the mandatory purchase quotas for drinking milk should be adjusted to reflect the actual decrease in consumption. Purchasing more raw milk than the demand necessitates converting the excess into powdered milk, which incurs losses and inventory burdens. Additionally, the increasing market penetration of lower-priced imported sterilized milk and dairy products adds to the industry's challenges.
Farmers, however, maintain a different stance. They argue that with actual purchases already about 50,000 tons below the standard quota, further reductions based on the 1.941 million tons would be excessive. They point out that the price for drinking milk is 1,084 won per liter, higher than the price for processed milk at 882 won. As the drinking milk quota decreases significantly, the income farmers receive for raw milk is also expected to decline. There are concerns that drastic reductions could further weaken the domestic raw milk production base amid rising production costs and a decreasing number of dairy farmers.
In the previous negotiations, the drinking milk quota was already reduced once. In the 2024 negotiations, the drinking milk quota for 2025-2026 was cut from 1.95 million tons to 1.941 million tons, a reduction of 9,000 tons, while the processed milk quota was increased from 100,000 tons to 109,000 tons, an increase of 9,000 tons.
This time, the ongoing decline in white milk consumption has heightened the need for additional reductions, but the conflicting interests surrounding the reduction criteria have prolonged the negotiations. If the subcommittee reaches an agreement by the end of this month, the proposal will be submitted for approval by the Dairy Promotion Association's board, with new quotas expected to take effect in January.
* This article has been translated by AI.
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