Israel reforms dairy market

Hoard's Dairyman: 

Israel reforms dairy market

Date: 
Thu, 07/28/2011

Prime Minister Benjamin Netanyahu adopted the recommendations of the dairy sub-committee Wednesday aiming to slash dairy prices significantly.

As dairy industry reforms are implemented, producers will be obligated to report earnings, exemptions from binding contracts with produce distributors will be annulled, and target price will be slashed by dozens of percentage points, noted Israel Business.

The recommendations adopted also include gradually opening the dairy market to competition and auditing feed mills. Additionally, food chains will be obligated to mark products, retail-supplier relationships will be examined, unused quotas will be opened up to competition, and small dairies will have an opportunity to expand before their final quota is determined.

The subcommittee for the review of the dairy market, under Ministry of Industry, Trade and Labor Director-General Sharon Kedmi, was appointed by Industry Minister Shalom Simhon and Finance Minister Yuval Steinitz at the request of Prime Minister Netanyahu.

Committee members were charged with examining the entire dairy market value chain with an end goal of cutting prices for dairy consumers while maintaining profitability throughout the value chain.

Opening the market
Gradually, the dairy market will gradually be opened up to competition, and quotas will increase with tax rates fixed at 20 percent. In 2016, the market will be opened to imports, sans quotas.

In regards to the dairies’ sector, the committee determined that dairies will be obligated to report their earnings, and production quotas will be set on the basis of 2011 quotas for a five-year period, beginning in 2012. After three years, the government will be able to finalize quotas, and unused allotments will be opened to competitive production not on the basis of the target price.

Furthermore, it was determined that small dairies will be allowed to expand during the arrangement period to a 700,000-liter (1.59 million pound) quota.

The current Antitrust Law will be amended to annul exemptions granted to produce distributors from binding agreements. Retail chains will be obligated to report profitability each quarter, on the basis of which the government will determine whether to implement full supervision over products. Retailer-distributor relationships will be inspected, and larger suppliers will be banned from importing end products.

Producers hit the streets
Following enactment of the reform, hundreds of dairy farmers took to the streets in three locations to protest the committee’s recommendations. The farmers say these recommendations run counter to a law enacted just this past March that enshrines the farmers' rights.

Producers noted that lowering the target price for milk and opening the market to more dairy imports will not lower the price paid by the consumer. It will only increase the profits earned by the major dairies and the supermarket chains.