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Will the price of butter stop agricultural reform?

The basic premise that the opening of the market to imports will be reflected in price declines, received a blow precisely from the product that is about to come out of control, butter.

During the shortage of butter, the market opened up to imports - and the price actually went up.

Is it possible to learn from this also about what is expected in fruits and vegetables, or is it a market with unique characteristics?

Tags

• butter

• reform

• agriculture

• Ministry of Finance

• yield

• Lurfek

Dr. Hezi Gur Mizrahi

Wednesday, 24 November, 2021, 10:56 Updated: 11:11

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The simple way to spread cold butter on a slice of bread (Walla! News system)

At the heart of the cost-of-living storm and between a new reform and a decree, it has been learned that the Minister of Finance and the Minister of Agriculture will remove the butter, next week, from the control products What is really hidden after the decision?

First of all, a few numbers, at your disposal: The butter market in Israel generates about NIS 280 million a year. Despite the growth in the category in Israel, which has jumped close to 35% in the last 3 years, the Israeli consumer does not equal the volume of consumption compared to its counterpart in Europe and North America.

The average Israeli consumes a total of 850 grams of butter per person per year, however, in Canada for example it consumes 3.7 kg of butter per capita per year, before which is actually poor India, where consumption is 4 kg of butter per capita per year (probably due to the use of butter 'Island, local tea), but when you return to the battle for the top of the table, you find rich countries like Denmark with 6.4 kg per capita per year and in first place, how unsurprisingly, the French who consume more than 8 kg per capita per year.

The main reason for the gaps between Israel and the world is probably kosher: butter is used as a key ingredient in most kitchens as a material for roasting meats, as an addition to soups and sauces - and of course in the worlds of confectionery and baking. In Israel, naturally, it is hardly integrated in the kitchen but in dairy meals and desserts, at least among a large percentage of the public who are careful to separate meat from milk.

Another factor is the weather. Although India "spoils" this thesis a bit, it can be said that there is a correlation between temperature and butter consumption: cold countries consume more. This is also evident among the Israeli public: until two decades ago, consumers who came from Eastern countries used to consume margarine and not butter, and we see this even today, in countries like Iraq, Iran and China that consume almost no butter as part of their eating and cooking culture.

It is also important to know that in order to call butter by its name, it must contain 80% fat.

The other products that contain about 60% fat are butter spreads or flavored butter spreads.

Some have become popular in Israel, but this is not "real" butter.

In the last two years butter has been making headlines, the shortage of butter has received media coverage focusing on the empty shelves, but a review we did show that there was no real shortage of raw materials that made it difficult to meet the rising demand (below). It is too low - and does not justify production.

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To the full article

Due to the shortage of butter, the Israeli market opened up for imports, but the price jumped by tens of percent instead of falling.

Why actually?

(Photo: ShutterStock)

What is clear is that due to the shortage, the butter market opened up and quotas were given to importers to flood the market with butter. What is the purpose of opening the market? At least according to the Treasury, apropos of the discussion of opening the market for imports of fruits and vegetables, presented to us both the problem and the solution: there is a price problem and opening the market will lead to general reduction, following which consumers will save thousands of shekels a year in household expenses.

But if butter is the index that predicts a result in price only based on the opening of the market to imports, then this thesis encounters a difficult problem: the price of control for butter is NIS 3.94 per 100 grams. The price of a package of butter that Tnuva, the only Israeli supplier that provides a solution to the retail consumer, is NIS 7.98 for a 200-gram package. The market opens, ships of butter docked in Israel.

According to the Treasury's logic, the price was supposed to go down, so how is it that a 200-gram packet of Willipod butter costs the consumer about NIS 15 and a (basic) Lurfek butter costs about NIS 13 per consumer?

That is, according to the butter index, the opening of the market has led to price increases of tens of percent!

After all, if producers or farmers (of the dairy farm, the raw material for butter) have a problem with price-control, would it not be better to raise it, say, by 10%, instead of opening the market to imports and letting the price climb by tens of percent?

Butter: The global market is expected to grow from $ 55 billion to $ 67 billion, of which 44 for private consumption (supermarkets) (Photo: ShutterStock)

A growing market, not only in Israel

Apparently there is a clear victory here for the claims of those who oppose the reform, but it should be remembered that the market is not only affected by the supply, but also by the demand - and here it is worth examining what happened to the demand during the corona period. Well it turns out that despite the global health trend that butter does not really fit into, let alone veganism, apparently the long stay in homes and specialization in the fields of cooking and baking, did not skip the butter shelves.

Demand has grown - and contributed to the shortage. Moreover, the coverage of the shortage also led to increased purchasing: more consumers accumulated butter just as they had previously accumulated eggs or toilet paper, whenever the media reported a shortage.

Despite the global health trend, the emerging trend is that butter will continue to show growth in the coming years as well. The forecast is that global sales per year, which currently stands at $ 55 billion, will reach $ 67 billion within 5 years, 44 billion of which - in the private market (that is, in supermarkets and not in food factories or the institutional market).

The Treasury, by the way, is convinced that taking the butter out of control will pay off in the long run and prices have gone down.

This is what was written in official publications on behalf of the finance economists, but when we asked for their attention to the issue, we were transferred to the Ministry of Agriculture.

Apparently no one wants to go out into the autumn sun of the angry public over the price hikes, with butter on their heads.

But by the way, the finance policy, perhaps it would have been worthwhile at all to think of a taxation similar to that of sugary drinks - and to impose a tax on butter, in the name of concern for the health of citizens ...?

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