(photo credit: Guy Hecht)
The Industry, Trade and Labor Ministry announced an increase in the price of
government-supervised bread by 6.53 percent starting Tuesday. The price of a
standard 750-gram loaf of white or brown bread under government supervision is
now NIS 5.24. In addition, the prices of almost all wheat products are expected
Bread prices in Israel, even with the state controls, are not
dramatically different from other countries. In fact, the price of a standard
loaf in some countries is much higher – the equivalent of NIS 7.74 in the US,
NIS 15 in France and NIS 17.53 in Italy. Here in Israel, Angel Bakeries’ white
bread currently sells at NIS 7.15 at Shufersal, which works out to NIS 0.95 for
100g. Americans pay the equivalent of 1.24 NIS for 100g. By contrast, Egyptians
– whose bread is heavily subsidized – pay only 4 agorot for 100g. And the
British consumer can buy white bread at Tesco for as little as 37
Bread prices are affected by the world grain and fuel economy.
Because of a drought in the US, which is said to be the worst in 50 years, crops
such as corn, soybeans and wheat have been severely harmed, and flour prices
have skyrocketed with increased demand. Some countries, such as Canada, have
stepped in to pick up the slack, but wheat futures, an indicator of what the
market expects prices to be, have gone up by 50%, from $6 to $9 a bushel, since
On Tuesday, it was reported that France, the current chair of the
G20, was seeking an emergency meeting to discuss the situation.
and the United States remain attentive to any new fact that could justify a
meeting of the Rapid Response Forum,” said French Agricultural Minister Stephane
In a gesture to the consumer, Israel’s Rami Levy supermarket
chain announced that it will continue selling bread at the old prices through
the end of the High Holy Days.
In the foreseeable future, grain prices
are likely to remain high. With this in mind, Israel faces a choice: Allow the
free market to determine prices, use the existing price controls to deal with
the problem, or change the system.
Traditionally, the government has
heavily regulated the prices of staples such as bread and milk. Until 1990,
bread was subsidized by state aid to bakeries. But as the country moved from a
socialist to a more open-market economy, subsidies were replaced by price
controls. This system has provided the poorest consumer with an affordable
However, as many will testify, the cheapest “simple” option for
white or brown bread consists of a hard loaf that is often tasteless and
difficult to digest.
Prices for bread products quickly increase outside
the controlled bread aisle in supermarkets. Pitas are five for NIS 9, and
unsupervised loaves of sliced bread usually cost more than NIS 10.
comparative survey by the Knesset’s research and information center for economic
affairs last year noted that Israeli food prices were continually increasing and
outpacing price rises in Europe by a factor of five. Israelis also pay higher
prices for some locally made products that should be cheaper, such as olive
Opposition parties are already jumping at the opportunity to condemn
the coalition for not caring about the poor. The prices of staple foods are of
huge concern to the public, and could result in grassroots protests again, such
as last year’s cottage cheese boycott.
The problem that Israel faces is a
price-control system that warrants constantly raising prices in line with the
global wheat and fuel markets. One option the country has is to pump public
funds into subsidies for bakeries to bring down the cost of bread. But
government-subsidized bread is likely to be sub-standard since there is no
incentive to the baker to produce a good product. This type of jerry-rigging is
not a long-term solution.
Nevertheless, it is important that the
government show that it is helping – and feeding – the poor. Many Israelis
struggle to get by on mediocre state support and work for minimum
Bread is still a powerful symbol, as it was in the famous riots
that helped spark the French Revolution. The government must heed public anger
over the rising costs of bread and should also consider removing tariffs on
imported products, such as olive oil, in an attempt to reduce domestic olive oil
prices. Finally, it should find a better way to support the Israeli consumer
than the current price-control system, which has proved inefficient and
ineffective, and provides the poor with mostly inedible bread.