"Why Is Milk So Expensive in Korea?"... Dairy Farms Shutting Down One After Another, Why?

Milk Prices Rank Third Globally... Nearly Twice as High as Japan
13.7% of Dairy Farms Shut Down in the Past Five Years
Dairy Industry: "Distribution Structure Is the Real Problem, Not Raw Milk Prices"

Although the retail price of milk in Korea has soared to one of the highest levels in the world, dairy farmers at the production sites are facing negative margins and the risk of going out of business. The dairy industry is urging the government to implement emergency measures, arguing that the cause of high milk prices is not the farmgate price of raw milk received by farmers, but rather the excessive margin structure at the manufacturing and distribution stages.

The dairy industry points to the margin structure in the manufacturing and distribution stages as the cause of the high milk prices.

According to Global Product Prices.com as of January this year, the price of 1 liter of milk in Korea stood at $3.42, ranking third among 78 countries surveyed. This is more expensive than the United States ($3.04) and nearly double the price in Japan ($1.82).

The price of milk in Korea has ranked among the highest globally for several years. According to Numbeo, Korea ranked sixth out of 96 countries, and in a May 2023 survey by Global Product Prices.com, it climbed to fifth place.

The More You Milk, the More You Lose... Dairy Industry Says "The Problem Is the Distribution Structure"

However, the reality for dairy farmers who actually produce the milk is the complete opposite. Over the past five years, 834 dairy farms, accounting for 13.7% of all dairy farms, have closed down. The average debt per farm has exceeded 500 million won, with borrowed capital per dairy cow increasing by 45.6% and interest expenses rising by 68.6%, respectively.

This year, the average production cost for farms is 1,252 won per liter, which exceeds the raw milk price for drinking milk (1,249 won), effectively pushing them into a negative margin structure. The more milk they produce, the greater the losses they incur.

The dairy industry claims that a significant portion of the increase in consumer prices occurs at the manufacturing and distribution stages. According to an analysis by the Korea Dairy & Beef Farmers’ Association of milk price trends over the past 20 years (2004–2024), the consumer price per liter increased by 1,706 won, but the increase in the raw milk price was only 567 won. About 70% of the total price increase was added during the manufacturing and distribution process, not at the farm level.

The domestic milk distribution margin rate is 35.1%, which is twice as high as Japan’s (16.8%) and about four times higher than the United States’ (8.8%). Despite lower raw milk prices than Japan, a structure has developed in Korea where the final consumer price is higher.

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Narrowing Market for Domestic Raw Milk... 114% Surge in Dairy Imports

The expansion of imported dairy products is also squeezing the market for domestic raw milk. Compared to 2010, last year Korea’s domestic raw milk production fell by 5.9%, while dairy product imports increased by 114%. Imports of powdered milk, converted to raw milk equivalent, reached 683,000 tons—double the amount of domestically used processed raw milk (343,000 tons). The self-sufficiency rate for domestic raw milk has dropped to 45.8%.

Lee Seungho, President of the Korea Dairy & Beef Farmers’ Association, said, “Rather than blaming the milk supply issue on declining consumption or farm production, we should first address the growing dependence on imports and the abnormal distribution structure.”

This content was produced with the assistance of AI translation services.