Nation’s powdered milk piling up

The country’s stock of powdered milk is at a 12-year high because of an oversupply and shrinking demand, keeping dairy farmers and distributors on tenterhooks.

The stockpile of powdered milk is used as an indicator of supply and demand.

In June, the amount of stored powered milk reached 15,554 tons, the highest level since November 2002, according to the Korea Dairy Committee.

Cows are known to be less productive in hot weather, and thanks to a cooler summer this year, cattle nationwide produced more milk.

At the same time, milk is not as popular as it once was due to increasing prices and other choices.

Sales of dairy products at E-Mart, for example, declined 4.3 percent in August compared to a year ago.

The large amount of powdered milk in storage sheds light on a pricing system used by the dairy industry that doesn’t take into account supply and demand.

Typically, dairy farmers and milk distributors set prices in relation to changes in the consumer price index.

The pricing system left many consumers disgruntled because the price of milk has consistently shot up for years and shows no sign of declining, despite the milk glut.

The Korea Dairy Committee, which represents farmers and those in the industry, will seek measures to adjust the milk supply in consultation with government officials.

“We plan to hold a meeting on Friday,” said a representative of the committee. “We all agree that certain measures are needed to deal with the ever-increasing stockpile, otherwise, farmers will resort to dumping the milk powder.”

Farmers and distributors, however, are at odds over how to address the problem. Farmers are in favor of maintaining the current level of production, while distributors want to reduce the amount.

The Ministry of Agriculture, Food and Rural Affairs announced it will funnel 14.9 billion won ($14.3 million) this year to help farmers handle the oversupply. For next year, the ministry allocated 29 billion won.

The local dairy industry faces further troubles as China, one of the biggest customers of Korean milk, has banned many local brands.

In May, China introduced new regulations requiring foreign companies to undergo tougher registration and audit procedures.

Korea’s major companies - Namyang Dairy Products and Maeil Dairy Industry - can’t export their milk to China.

The toughened regulations came after a 2008 scandal involving Chinese-produced milk tainted with the industrial chemical melamine killed at least six infants and left thousands ill.

The Beijing government’s goal is to ensure a larger share of the market for Chinese companies who lost ground to foreign companies.

“We know that it is one of the most difficult times for milk manufacturers and distributors,” the representative said.

“But members of the association are willing to discuss the matter with the government officials.”

BY PARK EUN-JEE [ejpark@joongang.co.kr]