Customs duties on dairy delicacies, yogurts and cheeses up to 5% fat will fall

Customs duties on dairy delicacies, yogurts and cheeses up to 5% fat will fall, and imports will become cheaper for importers: Finance Minister Avigdor Lieberman signed an order today (Monday) to abolish tariffs on delicacies, yogurts and thin cheeses, as well as increase import quotas for hard cheeses. The state's tax revenues are expected to shrink as a result of about NIS 10 million.
According to the Ministry of Finance: "The order will allow the opening of the market for free import of these products from European countries where the consumer price per kilogram of yogurt is about 8.5 shekels per kilogram on average, compared to 17 shekels per kilogram in Israel." Milky is soon sold for three shekels in Israel, in Germany a similar delicacy is sold at less weight.
It was also stated that: "The order includes an increase in duty-free quotas by about 5,000 tons for the import of cheeses in the quota - the imported cheeses are expected to be about 25% cheaper than the regulated price in Israel so the price to the consumer is expected to fall by about NIS 10 per kg. All this, while preserving local agriculture. "
The dairy market in Israel is undergoing a process of opening up to imports. To date, tariffs have been imposed on many imported dairy products to protect the local dairy farm. About two years ago the customs on butter was abolished in an annual order and recently the price control on butter was abolished. The result of the opening of the market for duty-free import of butter was a rise in prices.
What is going to happen following the opening of the market for imports? By state prices will go down and consumers will celebrate. This never happens in the simplistic way that government ministries try to present it. Here are some possible scenarios.
Scenario One: Neglected impact of imports on the market. This is what happened to yellow cheese. Every year, duty-free quotas on yellow cheese are distributed, including state supervision of the final price to the consumer. The price of a kilo of yellow cheese has fallen because the state requires importing importers to quote a portion of the quotas at a low price to the consumer and commit to it. They must sell at that price and not exceed it. In addition, there is a wide import of hard and semi-hard cheeses with high prices, thanks to the benefits given to importers.
In this way, importers may start importing yogurts and delicacies to Israel, but consumers will prefer the local brands because they are used to the taste of local milk. The price of imported products may be low, but will not affect the market or affect it in a negligible way.
Another scenario is that imported products will capture a significant market share. Giant companies from Europe will sell in Israel. The dairies will become importers and at some point will stop producing milk in Israel. Israel will become dependent on foreign milk (which is very bad for a country like Israel that wants to show sovereignty) and prices will inevitably go up (foreign chains and foreign brands are almost always expensive in Israel, because it is an island economy and because consumers in Israel are willing to pay more). As a result of this scenario the local industry will be liquidated as a large and organized industrial economy.
An intermediate scenario is that cheap imports will begin to flow to Israel alongside expensive imports. Importers like to import expensive products, as can be seen from the import of butter for example. Imports will bite local production, but not in a way that will eliminate it and not in a way that will cause it to lower prices. Some of the local brands will move to foreign production. The market will be mixed: domestic and imports and the price range will expand: there will be cheap and expensive products, with a tendency to sell premium products (already in the dairy market) enriched with protein, which will raise prices upwards.
Along with these scenarios, it is important to know: Why is the price of these products 100% more expensive in Israel compared to Europe? First of all, because this is what consumers in Israel are willing to pay. They are ready to buy delicacies and yogurts for NIS 8-5. In addition, Europe is large, there are more cows and it produces huge amounts of milk. For example, 4.2 million dairy cows in Germany produce 31.1 billion kg of milk a year according to 2019. There is also a common market with borders that are almost non-existent, so Germany can for example produce cheaply in Poland and transport the products cheaply, by land and not by sea and air. And let's not forget: even there, huge companies rule.
The largest producer of dairy products in the world is the Swiss Nestlé and the French Catalis. The giant corporations also operate in Europe: Arla, Danone, Friesland, Unilever and Muller. Outside of Europe there are giants like New Zealand Puntra, and Canadian Septo.
In the US, too, the market is dominated by giants such as Septo, Nestlé, Schreiber, Kraft Heinz and Danone. It markets brands like Camps and Borden cheese.
Israel already has imports of Greek yogurt, for example by Shufersal, but its price is high (NIS 5.90 for a 150-gram cup) and its market share is negligible.
According to sources in the dairy industry, this move is likely to lead to closer collaborations with foreign dairies in the field of delicacies and yogurts. It has been argued that in the field of soft cheeses this may be a move that will lead to the removal of price controls from white cheese, but also that there is no real successful equivalent in the world to Israeli white cheese and all imports in the field of thin cheeses are questionable. The taste of cottage cheese abroad (a product whose price is unsupervised and became very expensive when taken out of control) is also different from the cheese sold in Israel, which is considered better. That is: there will probably be no fierce competition in these segments.