Israel Matzav

Dairy prices to finally come down?

I am sure that not a single Israeli will be surprised to hear that there are two reasons we are paying NIS 5 for a liter of milk (with NIS 3.5 to the dollar). One is the fact that our dairy is monopolized by Tnuva, with the government's blessings. The other is that tariffs are so high as to keep all imports out. Now, that might be changing a bit. Economics and Trade Minister Naftali Bennett has announced that tariffs will be dropping by as much as 80% on dairy products. Wait until you hear how much the tariffs are before you rejoice....

Economy and Trade Minister Naftali Bennett on Wednesday announced that he was planning on lowering import taxes on a basket of dairy products including butter and yogurt by 80%.

"We are continuing to open up the economy and bring down prices," Bennett said. Currently, customs on some dairy imports stands at over 100%, he said. The reduced customs rates will have quotas, which Bennett says will help the small companies increase their grip in the import market and increase competition.

"I expect the reduction in customs will be passed on to consumers," he said.

The full list of reduced quotas, which will apply to retail-packaged butter, concentrated and non-concentrated milk and cream, buttermilk and yogurt, will be published in the coming days.

...

The dairy market in Israel is a complex trap of protectionism and regulation. The government regulates the price of dairy and outlines quotas for small dairy farms, who typically sell their product to one of three large manufacturers: Tnuva, Strauss, and Tara.

Tnuva on its own controls some 70% of the dairy market, and is considered a legal monopoly by the Israel anti-trust authority, which also has regulatory power to try and prevent it from price gouging.

Although Israeli agricultural technology has made its cows the most efficient dairy producers in the world, the combination of high tariffs, quotas, price regulation and Israel's geographical isolation from other dairy producers has led to a situation in which its dairy prices are higher than most OECD countries.

Is this any way to run an economy?  In the long run, Tnuva should be broken up - should have been broken up 20 years ago (they also dominate fruit and vegetable marketing and are on the verge of being bought by a Chinese state company). But don't hold your breath waiting for that to happen.

Labels: Israeli economy

posted by Carl in Jerusalem @ 12:30 PM