Farmers, producers agree on raw milk price hike

SEOUL, Aug. 16 (Yonhap) -- Dairy farmers and milk producers reached a long delayed agreement Tuesday on a hike in the price of raw milk, a move feared to make milk products more expensive and add to inflationary pressure.
The agreement, immediately effective from Tuesday, calls for raising the average price of raw milk from the current 704 won (US$0.66) per liter to 842 won. The compromise was reached after several rounds of negotiations between the Korea Dairy and Beef Farmers Association and milk companies that began June 21.
The dairy farmers' association earlier demanded an increase of 173 won per liter, claiming the current price did not even cover their costs. The current price of raw milk was set in 2008 and has remained unchanged since.
Milk companies, however, offered to raise the price by only 81 won, although they later offered a 130 won increase.
The 138-won increase, approved on Tuesday, was proposed by the government after the two sides failed to overcome their differences after nearly two months of negotiations, prompting dairy farmers to stop supplying raw milk to milk companies for three days last week.
The rise of the raw milk price will inevitably lead to a price hike for milk products, but the shelf price of milk is expected to rise by a significantly larger margin.
Some of the milk companies are expected to reflect the rise of their other costs, such as labor, in their latest price hike, leading to a price increase of 300 won to 400 won per liter.
A rise in milk prices will also lead to a price increase of other milk-based dairy products, including butter, cheese and even bread, exerting further upward pressure on the country's already high consumer prices.
South Korea's consumer prices jumped 4.4 percent from a year earlier in July, surpassing the government's annual inflation target of 4 percent for the seventh straight month.
Agriculture Minister Suh Kyu-yong earlier said the government has asked the country's milk companies to delay their price hikes at least until next year.
The companies have already refused, though not explicitly, to comply, saying the rise of prices is also taking heavy tolls on their costs.
bdk@yna.co.kr