By coordinating production levels and reducing supply, farmers and slaughterhouses have been steadily pushing up the price of chicken for the past year and a half, according to supermarket chains.
- Court's Tel Aviv Shabbat Ruling Upset a Delicate Status Quo
- The Unpalatable Cost of Bringing Down Food Prices
- The Incredibly High Cost of Keeping Your Food Kosher
- He Who Knows Not How to Ask - Pays Up to 60% More
“The farmers and the slaughterhouses, which often own [the farms], are running a cartel, which drove up prices by dozens of percentage points," said a senior executive at a major grocery store chain. "We need more competition over such a basic product.”
The chicken farmers don’t deny it — Israeli antitrust law actually allows farmers to coordinate prices and behave as a cartel. The farmers say they are just trying to avoid selling at a loss and blame the supermarkets for raising prices at consumers’ expense.
The price of fresh chicken has increased 20% since June 2012, and chicken breast prices are up 25%, according to data from the Central Bureau of Statistics. Prices are expected to jump another 10% by Passover, in two weeks, say supermarket sources, which would mark an all-time high.
In the past 10 years — since March 2004 — the price of fresh chicken has increased 27%, and chicken breast is up 30%.
Grocery store chains say that for the past two months, the slaughterhouses have been gradually raising prices and intend to keep doing so until the holiday.
“Over the past two weeks, all the slaughterhouses we work with called and said they’re raising prices by 5%. So far, we’ve managed to stop them. But I think the closer we come to the holiday, and demand increases, we won’t be able to fight and prices will increase by about 10%,” said an executive at a midsized grocery store chain. “Currently, we’re paying 16 shekels per kilo. By the holiday, it’ll definitely be at least 18 shekels.”
Demand for chicken jumps by 50% around the Passover holiday every year, and the slaughterhouses and farmers take advantage by coordinating a drop in supply under the law that allows them to do so, says the executive.
“Every Sunday, the slaughterhouses call the grocery chains to give them their prices for that week," he said. "You can’t help but notice that their prices are always similar. There’s no competition between them, and there’s no chance that someone would raise prices while another is cutting prices. The trendline is always identical. This is because they have complete control over the production process and the supply, and therefore over prices.”
A senior executive at a big supermarket says that over the past two months, the slaughterhouses hiked prices by more than 20%, from 12 shekels a kilo two months ago to 15 shekels a kilo now. “It’s been two months now that they’ve been raising prices gradually every week, always a few percentage points at a time,” said the executive. “You can’t negotiate over the price. They say, ‘You want it, buy, you don’t want it, don’t buy.’ Since there’s competition for consumers, at the discount chains, you won’t really see the price increases, but at urban stores and at non-chain stores, prices will be higher.”
The grocery store chains are incensed by what they see as a cartel among the poultry farmers.
The senior executive at a major grocery store chain said, “They don’t even hide the fact that they talk to one another, and that they set their policies as a group.” He said the coordination has been going on for a year and a half.
The Antitrust Law allows farmers and the distributors of farm products to coordinate prices, divide up the market and form cartels. An amendment that recently received Knesset approval will limit this privilege to farmers. The amendment takes effect in a year.
According to Central Bureau of Statistics data, chicken prices, as measured by the price to consumers, peaked in September 2009 at nearly 22 shekels a kilo and then began a descent, with increases around Passover and Rosh Hashanah every year. In July 2012, chicken prices hit a low of 17 shekels before starting to increase again. Prices were nearly 22 shekels a kilo in July 2013 and February 2014. They are expected to increase further by Passover.
The Israel Poultry And Egg Marketing Board said slaughterhouses had not cut back work days to create artificial scarcity.
Other industry sources say wholesale prices had not actually increased and that claims to the contrary were an attempt by retailers to increase prices and profits.
But farmers admit they have an agreement to reduce supply to raise prices. They say they have no choice given their relationship with the supermarkets, which they say are the ones making a killing at the public's expense.
Farmer Itzik Mendel says that a year ago, following a major surplus in supply, farmers lost a lot of money due to the low prices, forcing some to find financing and others to go out of business. As a result, he says, they pulled together to determine supply.
Mendel says it is possible to raise up to six groups of chickens a year, but under the agreement, nearly all Israel’s farmers are only raising five.
“The supermarkets know how to negotiate prices with the slaughterhouses,” he said.
Yaakov Cohen, a former head of the national poultry organization, supports the farmers’ agreement, which he describes as a written document in force until 2015. The trick is to coordinate supply to meet demand, he said, adding, “Under the agreement we produce an enormous quantity, and [chicken] consumption in Israel is among the world’s highest. We’re not starving the public, but we don’t need to be stupid and sell at a loss."