South Korea will temporarily allow local dairy farms to increase milk production to counter shortfalls caused by the culling of dairy cows due to the recent foot-and-mouth disease (FMD) outbreak, the farm ministry said Tuesday.

The move calls for production quotas to be raised by 5 percent for the next two years to help boost supply and preempt price hikes that can exacerbate inflationary concerns triggered by higher food prices, the farm ministry said.

The FMD outbreak, first confirmed on Nov. 29, has effectively spread throughout South Korea, causing quarantine officials to cull more than 2.1 million animals so far, including 134,735 heads of cattle.

The ministry estimated total milk production for 2011 may reach 1.91 million tons, or a drop of 6.8 percent from last year.

"Under the plan, demand for fresh milk will be handled by local production, while possible shortfalls in powdered milk used to make dairy products, breads and crackers can be met with imports if domestic production is inadequate," a ministry official said.

In addition, talks are under way to allow powdered skim milk and dehydrated condensed milk to be imported more cheaply under a tariff quota system, he added.

Such a move is expected to help stabilize prices of powdered milk that have started to go up in recent weeks mainly because the country's reserve has fallen to a little over 1,100 tons from the 5,000-6,000 tons that are considered adequate.

The farm ministry, meanwhile, said that to further arrest hikes in powdered milk prices, Seoul plans to buy milk that it has to import under a so-called tariff rate quota arrangement from abroad as soon as possible. Such efforts, it said, can stem price gains in dairy products. (Yonhap News)