The butter industry has undergone significant upheavals in recent years. In 2019 there was a national shortage of butter, which was resolved after the horizontal abolition of the caps that allowed free import of butter. One of the consequences of the abolition of the caps was the import of butter below the regulated price, which led the ministers of finance and agriculture to sign today (Tuesday) an order to abolish the control of butter prices.
The ministers said that “until 2020, the Israeli economy suffered from a shortage of butter, especially during the holidays. During this period, consumption was based on local butter production and few imports of butter quotas that did not meet demand. Butter was discontinued, and butter consumption increased by 50% (!) In 2020. In addition, the range of products increased by 30% and the price of unregulated butter decreased by 11%. “It increased by about 11%. Against this background, Finance Minister Avigdor Lieberman and Agriculture Minister Oded Forer decided that in light of imports, there is no need to continue to monitor the price of butter, and ordered the inspection to be lifted.”
Minister of Agriculture Oded Forer also said that “butter is an excellent example of the possibility of lowering and increasing the selection of products in the fields of agriculture when opening the market to competition. The war on the cost of living alongside the promotion of Israeli agriculture are the main goals I deal with.”
Dairy Council: Removal of supervision will lead to price increases
In contrast, the Dairy Council is less enthusiastic about the move. The Dairy Council is responsible for the central planning in milk, whose price control is only the last step. In the eyes of the CEO of the Dairy Council, Itzik Schneider, “Removing a product from supervision is an authorization to sell it at a more expensive price. This is a decision that will make Israelis pay more. This is a double blow to Israelis: to cowherds whose livelihoods are harmed, and to the weaker sections of the periphery, who will pay more for butter compared to the residents of the center. This is an award for importers and retail chains who can sell butter at an expensive price as they see fit. “This will lead people who will not be able to afford to buy butter to turn to margarine.”
The Dairy Council claims that “since the import of butter opened and can be marketed without public supervision, it pays twice as much for butter. Supervised butter is sold at NIS 3.94 per 100 grams, while imported butter was sold in 2020 by about 20% more on average. Any expenditure of a product from supervision actually gives permission to raise its price to the consumer. The controlled price sets a maximum price for selling the butter to the consumer, the importers can sell butter at a price lower than it, but the removal of the control only allows the price to be raised. Every import move that took place in Israel eventually led to more expensive products and did not make them cheaper, as happened with toiletries, fish and more. Instead of butter people will turn to margarine. “The decision harms the weaker sections and widens the social gaps. Butter in the center will be sold for less than butter in the butterfly.”
Sources in the dairy farm even noted that “the decision today creates a situation that has never been in the market. It will allow unsupervised sales to local producers as well – now there is not even a ‘lower threshold’ for the price.”
50.2% of the butter sold today is below the controlled price
The “Our Interest” consumer lobby actually supports the move, saying that “since the opening of the import market, supermarkets have been filled with cheaper butter, as well as quality and more expensive butter. The opening of the import butter industry has proven that imports lower prices “We welcome the decision and urge the ministers to continue the duty-free exemption on butter imports even after 2021 and on a regular basis.”
According to Elad Malka, CEO of the lobby, the average price increase is irrelevant because “there is cheaper butter and there is more expensive butter – the public chooses.” Eliminate tariffs The price has dropped, so we welcome the decision to abolish tariffs instead of import quota policies. “
According to the joint price committee of the Ministry of Finance and Agriculture, 50.2% of the non-special imported butter currently sold is below the regulated price, and the rest is sold at the regulated price itself, and therefore the minimum price is no longer relevant. Moreover, the removal of price controls will mean that in the event of future price increases, there will be no shortages as occurred in 2019, when the production price for Israeli companies exceeded the price that can be legally charged. Free imports, which have been around for over a year, reduce the likelihood of such a scenario due to the diversification of risks across the global market.