(photo credit: (Illustrative photo: Bloomberg))
Eggs, milk, poultry, oil and rice will all become significantly more expensive by the end of the year, according to a forecast released this week by the Agriculture Ministry’s Research, Economy and Strategy Division.
The price of dairy products is expected to rise between 6 percent and 13%; egg prices will go up 8% to 17%; and poultry prices will climb 6% to 14%. Corn and wheat prices are also expected to reach new highs. Bread under state price controls already got more expensive by 6.53% on Tuesday.
More price hikes are certain to follow, though most are not expected to take effect before the High Holy Days.
The sharp rise in food prices is being caused almost exclusively by external factors completely out of the control of our government leaders. For instance, the most severe drought to strike the US Midwest since 1956 has hurt corn, wheat and other crops.
Dry, hot weather in other parts of the world (France, Russia, Ukraine, China and Kazakhstan) have further exacerbated fears that a food shortage will jack up prices. Commodities traders anticipating the adverse effects of the drought have pushed up futures’ prices for corn, wheat and other crops. And speculation might be making the situation even worse.
Rising fuel prices, resulting in part from the tension with Iran over its nuclear program, have contributed to higher production costs, further pushing up food prices. The development of alternative energy sources, such as bio-energy and solar fields, are taking up larger portions of land once set aside for agriculture. Forecasts show that methanol and biodiesel fuel production will continue to grow while wheat crops will remain static.
And population growth continues to contribute to the steadily rising demand for food.
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In Israel, the shekel, which has depreciated against the dollar, is yet another factor contributing to higher food prices.
But it would be wrong to argue that nothing can be done to counteract global trends pushing up food prices. According to the most recent data available, in 2010 Israelis paid 10% to 20% more than the OECD average for an identical basket of food products. A Bank of Israel report issued at the beginning of the year found that in countries with buying power similar to ours food prices were more than 20% lower.
Just a few months ago the Kedmi Committee – one of several created in the wake of last summer’s socioeconomic protests – presented a number of recommendations designed to lower food prices. For instance, smaller and medium-sized supermarket chains should be encouraged – through government intervention if necessary – to compete with the oligopoly created by Shufersal, a subsidiary of IDB Holdings, and Mega, owned by Alon Holdings Blue Square, which between them corner 64% of the market. And Shufersal, Mega and other supermarket chains must be forced to stop reserving shelf area for Osem, Elite and other large food producers and suppliers, and allow more competition from smaller producers.
The large supermarket chains should also provide their own generic or store brand. Currently, there is a high level of collaboration between brand-name food producers and the large supermarket chains, which might be contributing to high food prices. In Israel generic brands make up just 5% to 10% of the market; in Britain and Switzerland they compose as much as 40%.
We must not allow our large supermarket chains and food producers to use the global trend of rising food prices as a convenient excuse to skirt their obligation to Israeli consumers. While it is true that the forces of nature, oil prices and other factors that have nothing to do with the Israeli economy are contributing to rising food prices, there is much that can be done locally to improve the situation.
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