Agriculture, Finance Ministries Sign Deal With Dairy Farmers on Pricing

The agreement’s goal is to prevent a rise in consumer dairy prices, despite the increase in raw milk prices over the past two years

Finance Minister Moshe Kahlon
Emil Salman

Agriculture representatives, the Finance Ministry and the Agriculture Ministry signed an agreement late Sunday night regarding the dairy industry for the coming years, after negotiations that lasted a year.

The agreement’s goal is to prevent a rise in consumer dairy prices, despite the increase in raw milk prices over the past two years.

Treasury officials say the deal is expected to substantially lower dairy prices, saving Israeli households hundreds of shekels a year. The decrease won’t be immediate but rather to commence in another two years. Until then, the deal is expected to freeze prices for controlled products, even though the wording of the deal allows them to rise 5-6%.

Finance Minister Moshe Kahlon signed an order on Monday to reduce customs on most imported dairy products starting in January. Treasury officials say that customs on yellow cheese will be lowered 38% and will continue to be reduced over the coming years to a rate that is 62% below current levels by 2026.

The treasury’s most urgent goal in solidifying the agreement was pushing back against a petition filed by Tnuva to the High Court of Justice because of Kahlon’s refusal to increase prices on controlled products.

Kahlon refused despite receiving a professional recommendation to raised prices mainly because of the increase in the price of controlled raw milk – known as the target price, which the dairies pay dairy farmers over the past two years.

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The deal will be presented next week to the High Court, and Tnuva will have to decide whether it accepts the mechanism added to the agreement as a kind of compensation to the dairies for past cost increases. The dairies are not a party to the new agreement, and they are expected to raise objections to the calculations that the treasury worked into the agreement.

The question that will be debated is whether the expected drop in the target price this January of 14-15 agurot (3.8-4.1 cents), is sufficient to compensate the dairies for the extra costs they have incurred, or if consumer dairy product prices will have to increase.

Israeli consumers, who pay some of the highest prices for dairy products in the Western world, should benefit from not only lower prices but also increased varieties of imported products.