Simhon rejects price controls on dairy produce

"We’ll make changes so we won’t throw out the bucket with the milk."

By GUY KATSOVICH / GLOBES
Shalom Simhon 311 (photo credit: Ariel Jerozolimski/The Jerusalem Post))
Shalom Simhon 311
(photo credit: Ariel Jerozolimski/The Jerusalem Post))
Industry, Trade and Labor Minister Shalom Simhon on Thursday rejected reimposing price controls on dairy products.
“There is a place for regulatory oversight, but not price controls, which would create empty shelves as in Eastern Europe,” he said at the Globes 2011 Media, Communication and Digital Conference today.
Simhon promised to cut dairy prices by 10 percent and create competition in the market, which he claims will reduce prices by a further 10% over the next three years.
“We must protect Israeli agriculture. Beyond its economic value, there are national values. We must protect Israeli industry, Israeli manufacturing that we built with our ten fingers and which no one will take away from us. But at the end of the day, we have an obligation to the Israeli consumer.”
Simhon called Israel’s dairy economy “No. 1 in the world,” and added, “This is a NIS 7 billion a year market, and we intend to reduce it by NIS 700 million. For this to happen, we must deal with a long line of factors along the production chain. Changes are being made, including the target price of milk. We’ll make changes so we won’t through out the bucket with the milk. Prices for raw milk will be slashed for dairies. Farmers will have to do their bit.”
The industry, trade and labor minister promised that “we will create competition in the dairy market so that we can produce more milk to bargain with the dairies. We’ll open the market to imports of powdered milk and hard cheeses. We’ll create competition on a scale so that they will achieve 10% of the industry’s total volume within three years.”
Israel Dairy Board chairman Shayke Drori slammed the work of the Kedmi committee charged with researching potential solutions for the country’s dairy crisis and the “dangerous and irresponsible conduct of Finance Ministry officials.”
He called it “a horrifyingly amateurish attempt to learn about the Israeli dairy market in ten days.
“All over the world, including countries that symbolize pure capitalism in North America and the EU, in all enlightened nations, the dairy market is supervised and planned,” Drori wrote in a letter to Prime Minister Binyamin Netanyahu.
“Milk is subsidized around the world, but in Israel, as you know, the direct subsidy is zero.”
The letter was sent following reports that the Kedmi committee for the review of the dairy market had completed its staff work last Thursday, and is due to submit its recommendations to Netanyahu during a special meeting with Simhon and Finance Minister Yuval Steinitz The conclusions have not yet been made public, but are expected to help Netanyahu reach a decision on a possible solution to the rise in prices for dairy products.
Netanyahu’s preferred solution is known to be boosting competition by opening the dairy market to imports.
“A decision on the importing of powdered milk or to raise the quota beyond the current level [20% of the dairy market], and exposure to global economic forces, will boomerang against the Israeli consumer within months,” Drori wrote, adding that “the prices of cottage cheese and other dairy products rose even when the price of raw milk in Israel fell.”
Drori claimed that the price of basic dairy products steadily rose because of the substantial increase in imports.
“As the shortage of milk and dairy products worsens, as is already happening in the world, it will be impossible to obtain products in Israel at all – even at high prices, let alone with the necessary kosher certification.”
Drori said that the small number of tycoons and importers “in the trough” are liable to take over “what remains of domestic production and supply” following the measure, which is also liable to “destroy the livelihoods of thousands of Israelis in the periphery.”
Drori warned Netanyahu not to make a decision until he makes sure that “the staff work you rely on is not fundamentally flawed.” He concluded by asking Netanyahu not to adopt “centralized thinking that will lead to a destructive decision to destroy 950 dairy farms and harm the dairy industry’s 13,500 employees, merely to concentrate the market in the hands of one or two tycoons.”
Drori also criticized the lifting of price controls, which he says will “come at the direct expense of the Israeli consumer.”