- Korea’s milk processors are accused of breaching milk pricing rules.
- Industry group demands quota cuts be resolved before 2027–2028 negotiations.
- Farmers are urging for legal safeguards and direct payments.
Korea’s dairy sector is entering negotiations over baseline raw milk volumes for 2027-2028 amid growing tensions between dairy farmers and processors.
According to a statement by the Korean Dairy and Beef Farmers Association issued on 10 July, processors have been reducing production quotas used to determine baseline purchasing volumes under Korea’s usage-based milk pricing system.
The group argued that these actions were undermining the framework established when the system was introduced and damaging farmers’ incomes.
It stated that the amount of raw milk purchased by participating dairy companies for drinking milk last year was only 81.2 per cent of the quota held by farms.
This was 7.3 percentage points lower than the 88.5 per cent quota, which is the standard volume range for raw milk for drinking milk under the system.
The group said that “processors’ arbitrary reduction of quotas in violation of this principle constitutes a clear breach of the system and a violation of their contractual obligations.”
It stressed that deep cuts to milk purchase volumes increase farmers’ fixed-cost burdens and drive up production costs, warning that further restrictions on already financially strained farms would only “accelerate the collapse of the industry.”
Calls for policy reform
The group said Korean dairy farmers have “become trapped in the worst management crisis” since the 1997 Asian Financial Crisis.
It urged the government and industry stakeholders to address quota reductions before setting new baseline volumes.
Among its demands are legally defined measures to prevent quota cuts by processors, implementation of previously promised support for 200,000 tonnes of processing milk, and an overhaul of financial support mechanisms.
The farmers’ organisation also urged the government to adopt a direct-payment model similar to Japan’s, arguing that support should flow directly to producers rather than through processors.
A tough time for dairy farmers
In June, the association published a report highlighting the dire situation of Korea’s dairy farmers.
The association said dairy farms are facing an unprecedented management crisis that is pushing them to the brink of closure, with 13.7 per cent, or 834 dairy farms, having shut down in five years.
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 KRW280 (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.
“As a consequence, average debt per farm reached KRW506m in 2025, while during the most recent five-year period (2021–2025) borrowed capital per dairy cow increased by 45.6 per cent and interest expenses on borrowings surged by 68.6 per cent,” said the association.
The statement concluded that restoring trust in the system must be the starting point for upcoming negotiations.
“We strongly urge that these negotiations become an opportunity to normalise the system and put the dairy industry on a path toward fair coexistence and mutual prosperity. It must be recognised that a system can achieve legitimacy only when it operates on the basis of trust.”
