Agricultural Reform Could End Up Exacting a Steep Price From Israel

Farmers seeking NIS 3 billion a year in compensation to transition to new model, significantly harming plan's efficiency, sources say.

David Bachar

Most of the country’s farmers seem to be in favor of a proposed overhaul of the system for supporting local Israeli agriculture, but persuading the final holdouts could cost the government as much as 3 billion shekels ($770 million) a year, sources said after another round of talks between the two sides Tuesday.

As reported in TheMarker this week, the finance and agriculture ministries have been working with growers’ organizations on a plan to replace many of the price and production quotas, as well as restrictions on imports, with direct aid to farmers.

The talks come as the two ministries are planning to reduce or eliminate import tariffs on farm products such as fresh meat as well as some processed goods like olive oil and tomato paste, with the aim of reducing retail prices. The proposals are part of a number of measures whose purpose is to lower consumer prices and introduce more competition into Israel’s food sector.

Farmers Shauli Peretz and Albert Peretz holding peppers at the northern Israeli moshav of Tzrufa.
Rami Shllush

Officials said Sunday they hoped to have temporary, pre-holiday reductions in place before Passover, in April, when food shopping and prices traditionally surge.

On Monday the chairman of the powerful Israel Farmers Federation, Meir Tzur, and the association’s director, Avshalom Vilan, gave their backing for the pre-Passover tariff cuts in a meeting with Agriculture Minster Uri Ariel. They are demanding unspecified compensation for farmers in exchange.

But other farmers’ organizations said they opposed the cuts, which they believe will not reduce food prices. “They’re throwing sand in the public’s eyes,” said the CEO and chairman of the Israel Farmers Association, Dubi Amitai. “You can’t address the high cost of living if you don’t tackle the business concentration and big margins food retailers enjoy. The treasury is afraid to address the real problem, which will hurt the tycoons,” he said.

Nir Amir, director general of the Kibbutz Movement, accused the government of seeking to distract the public from rising home prices. And growers said they were surprised that olive oil and tomato paste will be included in the plan, which they said would do little to cut prices but could hurt local canners and oil presses and cost jobs.

Negotiations over the bigger shake-up that the finance and agriculture ministries hope to implement next year largely revolve around the issue of how much compensation growers will receive in exchange for the elimination of production quotas and other mechanisms that have protected them from the whims of the free market.

Finance Ministry officials said they hoped to cap the annual aid at 1 billion shekels, while the Agriculture Ministry said that in the end the government and growers will settle on 2 billion shekels.

The problem is that so far the talks have not included the key areas of milk and egg production. Dairy and chicken farmers are engaged in a separate dispute over production quotas and government-controlled prices and have opted out of negotiations over larger reforms.

Both the dairy and poultry sectors are quite powerful politically. But yesterday sources said they might be willing to consent to the reforms if total compensation reached 3 billion shekels.

Oppositions has come from older farmers who fear they will lose out if the old system is abolished, as well as from the production marketing boards, which rebuffed previous reform attempts.

Fish farmers are set to be one of the first cohorts to try the waters of the new system. In yesterday’s negotiations, the parties reached an understanding in principle according to which the tariffs on imported frozen fish would be cut by 50% as a first stage. The results of the change would be assessed, and if favorable the import tariff would be eliminated alotogether. Production quotas would remain in place but farmers would receive tens of million of shekels in compensation that could be used to upgrade their facilities, among other uses.