Still No Deal in Sight to Lower Dairy Prices in Israel

Consumers left in the lurch as politicians can't agree who will foot the bill for cheaper cheese.

Talks with Prime Minister Benjamin Netanyahu on how to lower the prices of dairy products in Israel and introduce changes to the industry ended with no results Thursday after four and half hours of tense meetings.

In principle, it was agreed that the economy must be opened up to dairy imports, but a dispute between Finance Minister Yuval Steinitz on one side and Agriculture Minister Orit Noked and Industry, Trade and Labor Minister Shalom Simhon on the other side prevented any actual decision on how much to lower customs duties and quotas.

MKs dairy
Yossi Zamir

"There is no reason for the Israeli public to pay more for dairy products than people in most Western nations," Netanyahu said. The solution to the market failures in the dairy supply chain must be based on increasing competition throughout, which will lead in the long term to lower prices for consumers, he added.

The meetings were conducted in the Prime Minister's Office. PMO Director General Eyal Gabbai was tapped as mediator.

Netanyahu insisted that the parties reach a decision at the meeting, saying the discussions could not be stretched out any longer because the public is up in arms.

The treasury asked to permit imports of 5,000 tons of hard cheeses without any customs duties, but the Industry, trade and Labor Ministry only agreed to increase the quota from 1,080 tons to 2,500 tons. The 1,080-ton amount comes with a hefty 50% customs duty. Unlimited amounts of more expensive specialty cheeses, such as Brie, Camembert and Parmesan, can be brought in - but with 100% duty. The Finance Ministry want all 5,000 tons to be let in with no, or minimal, customs duties. The Industry, Trade and Labor Ministry is willing to allow only the 2,500 tons - but at 0% customs. The Agriculture Ministry is still insisting on the 1,080 ton limit, though duty-free. We should wait and see how the market responds to the customs reduction, and only then decide on opening the market to imports, said Noked.

Another dispute that Gabbai was asked to referee concerns the price the dairies pay farmers for raw milk. Noked refuses to allow the present price of NIS 2.19 per liter to be changed. Simhon proposed lowering this price by 10 agorot, but Steinitz wants to double that price cut. Every 1-agora reduction in raw milk prices would reduce the retail price of a liter of milk by around 8 agorot.

Hard, "yellow" cheese was chosen to be the first product for expanded imports since they have a long shelf life. The hard cheese market is worth NIS 700 million a year. Opening the market to imports would harm Tnuva in particular, which has an 80% market share in this area. Cottage and yellow cheeses are two of Tnuva's most profitable products, and the company has already been forced to lower its cottage cheese prices.

Increasing cheese imports would also hurt dairy farmers. It takes about 13 liters of milk to produce one kilo of cheese, and farmers fear large-scale imports would reduce demand for raw milk.

No timetables or details were set on such imports at yesterday's meeting. Gabbai is to meet with representatives from the relevant ministries next week to work out the details, with the goal of reaching an agreement by the end of the week.

There a a number of issues that have been agreed upon, such as easing the rules for merging dairy farms and reporting of profit margins for dairies and retail chains on certain products.

Steinitz said opening the market to imports would be done with sensitivity, in order to cause as little harm as possible to the country's dairy farmers.

Tnuva said in a statement that it would wait for the full decisions of the prime minister and the cabinet ministers before commenting.