Bread prices

Bread is still a powerful symbol, as it was in the famous riots that helped spark the French Revolution.

bread 311 (photo credit: Guy Hecht)
bread 311
(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 to rise.
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 agorot.
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 June.
On Tuesday, it was reported that France, the current chair of the G20, was seeking an emergency meeting to discuss the situation.
“France 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 Le Foll.
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 option.
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.
A 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 oil.
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 wages.
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.