- Over 13% of South Korea’s dairy farms have shut down in the past five years.
- Rising production costs have significantly outpaced increases in farmgate milk prices, forcing many farmers—especially those with fewer than 50 cows—into sustained losses.
- Dairy processors have reduced purchases from domestic farms despite previous policy assurances, contributing to the sector’s financial hardships.
A report published by the Korea Dairy and Beef Farmers Association on June 16 stated that 13.7 per cent, or 834 dairy farms, had closed over the past five years.
The association said dairy farms are facing an unprecedented management crisis that is pushing them to the brink of closure.
According to its data, average production costs rose by KRW171 per litre (USD0.11) between 2021 and 2025.
However, only 51.5 per cent of the increase was reflected in farmgate milk prices, leaving farmers to absorb the remaining losses.
Smaller farms with fewer than 50 cows, which make up 41 per cent of all farms, have been disproportionately affected, with many forced into sustained loss-making operations.
The association said production costs for smaller farms rose by ₩280 (USD0.18) over the period, with costs exceeding the average drinking milk price and pushing producers into the red.
At the same time, dairy processors have reduced procurement volumes, effectively lowering farmers’ output despite earlier policy assurances that quotas would be maintained.
Overall, farm debt has risen significantly, with average debt per farm exceeding ₩500 million (USD324,872).
Over the same period, borrowing per cow increased by 45.6 per cent, and interest payments rose by 68.6 per cent.
The wrong narrative
The association hit back at the media narrative that dairy farmers were responsible for rising consumer milk prices.
Its analysis found that around 70 per cent of milk price increases over the past two decades occurred at the processing and distribution stages, not at farm level.
Korea’s milk distribution margins stand at 35.1 per cent, roughly double that of Japan and several times higher than in the United States.
The group also rejected the ‘milkflation’ argument that higher raw milk prices were driving broader food inflation, noting that dairy ingredients account for only 1-7 per cent and are typically imported.
Beyond costs, the association pointed to structural imbalances in the market, particularly the growing reliance on imported dairy products.
While domestic dairy products have struggled, imports have surged.
In 2022, dairy companies used 505,000 tonnes of imported products - around 20 per cent of total imports – more than twice the 250,000 tonnes of domestic milk used for processing.
The association claimed that dairy processors have increasingly favoured cheaper imports, which benefited from tariff exemptions and policy support.
Not only are dairy processors purchasing less from local producers, they are also undermining them, contributing to the crisis, said the association.
“Recent media reports, based on inaccurate grounds, are simply echoing dairy industry-centred claims that place the blame for milk retail prices and supply-demand issues on dairy farmers,” said Lee Seung-ho, President of the Korea Dairy and Beef Farmers Association.
“The fundamental cause of high milk retail prices lies not in production sites but in an inflated distribution structure. Meanwhile, farm management is on the brink of collapse due to soaring production costs and reduced volumes,” he said.
Calls for urgent intervention
The association is urging the government to implement measures to address the crisis.
“Fundamental measures are urgently needed to prevent the collapse of the dairy industry,” said Lee.
It called for a budget and measures to guarantee 200,000 tonnes of raw milk from local farms for processing.
Additionally, it called for financial relief for struggling farmers, including extending loan repayment periods by at least three years, reducing interest burdens, and providing realistic compensation for older and small-scale farmers exiting the industry.
Lastly, it urged lawmakers to thoroughly investigate excessive distribution margins and take strict action against unfair practices by dairy processors, particularly arbitrary reductions in purchase volumes.
It also called for longer-term structural reform, including the introduction of a producer-led supply management system similar to milk marketing boards in countries such as Japan and Canada.
