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The major bakeries largely suspended production of price-controlled breads yesterday, including plain challahs for Shabbat, and demanded that the government raise prices in response to recent global wheat shortages, saying that otherwise, they will be forced out of business.

Industry Minister Eli Yishai has announced that he will not approve a price hike until the cabinet arranges to compensate poor consumers on a regular basis.

Yesterday, there were already disruptions in the supply of price-controlled breads - whole and sliced white bread and whole and sliced dark bread. The bakeries said there will not be any shortage of more expensive breads.

The bakery owners want an increase of 12.5 percent in the price of supervised breads.

Yohanan Aaronson, the bakeries' representative in talks with the government, said that they have already stopped producing 80 percent of price-controlled breads and challahs. He warned that unless the crisis is resolved quickly, some 800 bakery workers will have to be fired.

The industry employs about 5,000 workers.

Yishai yesterday urged the bakeries to do the socially responsible thing: continue producing these breads and suffer the losses. The bakeries rejected the suggestion, claiming that it would cause them unendurable losses of millions of shekels.

Aaronson and Yitzhak Berman, owner of Berman's Bakery, pointed a finger at Yishai, who they said has not complied with an agreement between the government and the bakeries to raise the price of supervised breads according to a set formula. Under that agreement, the price is supposed to be adjusted periodically in keeping with changes in production costs, such as wheat and energy prices.

The flour mills want to increase the price of flour by NIS 500 per ton, or 35 percent, because global wheat prices went up 30 percent last month and the dollar gained in strength against the shekel. Mill owners warned three weeks ago that prices would increase in July, prompting bakery representatives to apply for an adjustment in supervised bread prices.

Minister prefers a crisis

However, Yishai made it clear early this week that he would rather generate a crisis, in order to force the cabinet to establish a mechanism for regularly compensating poor consumers for price increases in basic products.

Yishai has proposed that the National Insurance Institute add a regular amount to allowances to needy families ahead of every expected price hike of this type. His ministry has calculated that it would cost NIS 22.5 million a year to cover the 12.5 percent increase in bread prices for 616,000 families. Therefore, each family would be receive an extra NIS 36.5 a year, or roughly NIS 3 a month.

"You cannot contend with Eli Yishai's demagoguery," said Yitzhak Berman of Berman's Bakery. "I do not know how to do that. So Berman's board of directors decided to accede to the flour mills' demand to raise the price of flour, but to stop producing breads that cause losses. These are the price-controlled breads."

The chair of the Knesset Economics Committee, MK Gilad Erdan (Likud), has scheduled an urgent committee meeting for Monday on the shortage of price-controlled bread. Erdan called for the government to subsidize the bakeries' increased costs and to order them to resume production.

Zvi Zrahiya contributed to this story.