The Great Butter Shortage

The Agriculture Ministry said it had foreseen the shortage of local butter, and recommended that the Finance Ministry allow the import of butter without extra tariffs.

MORE BUTTER?  (photo credit: REUTERS)
(photo credit: REUTERS)
The talk around dinner tables across Israel for the past few months has shifted from politics to butter. Unlike politics, the country has been suffering from a severe shortage of butter. Supermarkets and stores have run out of supplies of locally manufactured butter, and no one is sure who is to blame for this Chelm-like situation in which only imported butter (from countries such as the Netherlands, Belgium, France, Denmark and Lithuania) is available at much higher prices.
How did the country reach “The Great Butter Shortage” in the first place?
Israel’s dairy industry is closely regulated by the state, which determines both how much milk is produced and at what prices manufacturers and retailers can sell dairy products, including butter. Butter is produced primarily by Israel’s largest manufacturer, Tnuva, and the second-largest, Tara.
Tnuva was established in 1926 as a cooperative owned by dairy farmers from kibbutzim and moshavim. In 2008, controlling shares in Tnuva (56.05%) were sold to British Apax Partners. The British firm pushed up the price of cottage cheese to NIS 8 per container, which triggered nationwide protests in 2011. Three years later, Apax sold its shares in Tnuva to Bright Food, China’s second-largest food conglomerate.
The Israel Cattle Breeders Association claims that local farmers have been producing less milk because demand from dairy producers decreased.
The Israeli Dairy Board says it is not too blame, but it is government policy to give preference to local manufacturers, thereby protecting the dairy industries on kibbutzim and moshavim.
For its part, Tnuva blames the government for the shortage, saying it was doing its best to increase production but the government wasn’t allowing it to raise prices.
Tnuva rejected any suggestions that local butter is in short supply because it is being exported to China, Canada or elsewhere. A Facebook post showing Tnuva butter being sold in Canada cheaper than in Israel caused a stir on social media. In Israel, Tnuva butter is sold for NIS 3.94 shekels per 100-gram bar ($1.13) – a price set by the government – while it was photographed being sold in Toronto for 0.97 Canadian dollars per 100-gram bar (0.73 US dollars).
The Agriculture Ministry said it had foreseen the shortage of local butter, and recommended that the Finance Ministry allow the import of butter without extra tariffs.
Finance Minister Moshe Kahlon finally announced last week that Israel would increase the import of butter from abroad – for both household and industrial purposes – to compensate for the shortage of locally made butter.
He promised that the measure – which raises imports of household butter by 13% and industrial butter by 24% for at least six months – would “increase the butter supply in the market and end the shortage in stores.”
“There’s no reason in this day and age for there to be a shortage of butter,” Kahlon said, promising that in the future, the market would be open to unfettered competition “to ensure that the Israeli consumer doesn’t face this kind of situation again.”
Why does all this matter?  For one thing, the price of butter affects all Israelis. But it’s more than just that. Israelis want to buy locally manufactured butter, and they are used to paying a certain price for it. The issue is also symbolic.
Industry insiders say the butter shortage, which actually began last year, was the result of an intentional move by Tnuva after the Finance Ministry refused to raise the regulated price of butter.
According to an Agriculture Ministry report, the company increased its production by nearly 20% – from 3,569 tons in 2017 to 4,273 tons in 2018. In the first half of 2019, however, both Tnuva and Tara reduced butter production as it became less profitable, producing just 1,869 tons and 28 tons respectively. As a result, consumers turned reluctantly to imported butters.
Now that the Finance Ministry is allowing the import of tariff-free butter, and local dairies are again stepping up their production, the Great Butter Shortage – unlike the current political crisis – is expected to be over soon. But the bitter aftertaste will linger on.