Israel to Allow More Dairy Imports in Bid to Raise Competition

Finance minister: 'The right way to reduce prices is through true competition in the milk economy.'

The dairy industry may face more competition after Prime Minister Benjamin Netanyahu accepted yesterday the recommendations of Finance Minister Yuval Steinitz and Industry, Trade and Labor Minister Shalom Simhon to increase dairy imports.

"The right way to reduce prices is through true competition in the milk economy," Steinitz said. "That's possible only by opening the market to imports, as a part of government policy to reduce market concentration and increase competition."

Cottage cheese - June 29 2011

Agriculture Minister Orit Noked objects to the moves, saying they will not reduce consumer prices and will strengthen supermarket chains and dairy producers at the expense of dairy farmers.

Starting this year, the import of 3,000 tons of hard (yellow ) cheeses at a customs duty of 20 percent will be permitted.

The quota will be gradually raised to 9,000 tons by 2015, after which the quota will be lifted.

In addition, 1,080 tons of hard cheese will be imported with a duty of up to 20 percent. Dairies, supermarket chains and other large suppliers will not be allowed to import hard cheese.

The quota for the import of milk powder, which is used instead of raw milk in some dairy products, will be increased from the current 1,500 tons to at least 4,000 tons.

In another move, the price of milk paid to dairy farmers, currently NIS 2.15 a liter, will be immediately reduced by between 5 and 6 agorot. Subsequently, the price will be lowered according to a formula that will encourage dairy farms to become more efficient.

Dairy farms, dairy producers and supermarket chains will be required to file periodic financial reports that will help the government decide whether to restore price controls on certain basic items.

The government will also examine unusual agreements between suppliers and supermarkets under which the chains charge suppliers millions of shekels annually for the opening of new branches, reductions in profitability and annual bonuses. Such charges lead the manufacturers to raise their prices.

The supermarkets will also have to clearly mark which dairy items are price-controlled and mark prices on all dairy products per unit of 100 grams, to allow for comparison shopping.

The Dairy Board and the Cattle Breeders Association filed separate petitions to the High Court of Justice yesterday, asking it to issue a temporary injunction against the government's moves, saying they would serious harm the dairy industry.