Food prices in the world are falling, so why don't we feel it?
The global food price index, which reached its peak with the Russian invasion of Ukraine, has registered a decline for the fifth month in a row.
In Israel, on the other hand, the producers and importers demand to raise the prices, otherwise they will not survive.
why is it happening?
Greenberg roasts
08/08/2022
Monday, August 8, 2022, 08:42 Updated: 08:55
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If the global food price index is going down, how is it that our prices are going up? (Photo: ShutterStock, Doron Shiner)
Food prices in Israel have their own cycles: when the price of food in the world goes up - the price in Israel goes up with it, but when food prices in the world go down, those in Israel are left floating in the air at the top of the producers' and importers' pockets.
For example, the global food price index data shows a decrease for the fourth month in a row, but food producers and suppliers in Israel continue to show the need to raise prices - due to the price increases that occurred at the beginning of the year as a result of the Russia-Ukraine war and supply chain problems.
The global food price index decreased by 8.6% during last July, thus summing up a decrease of approximately 11.7% since the peak price reached during March 2022. However, it should be noted that the index is still 13.1% higher than its level in July last year.
According to the Food and Agriculture Organization of the United Nations, most of the recent decline is due to the reduction in the prices of vegetable oils and various grains, along with smaller declines in sugar, milk and meat products. The organization notes that this is the steepest decline in the index in the last decade. It is only close to the decline experienced by the index in October 2008 - about a month after the American investment bank Lehman Brothers announced a liquidation procedure that started the great financial crisis around the world.
Itai Ater, Calcutta professor from the Kohler Faculty of Management at Tel Aviv University (Photo: Micah Lovton)
In Israel, on the other hand, the data of the Central Bureau of Statistics show that the Israeli food price index (excluding fruits and vegetables) increased by about 1.2% for the months of April-June this year, and the hand is still tilted - towards the publication of the food price index for the month of July in about a week.
In June alone, the food price index in Israel increased by approximately 0.4%, and the CBS notes that this increase was led by baked goods and cake decorations, cookies and biscuits, prepared salads, processed fish, tahini, etc.
These data are connected to the demands of Israeli food producers and importers, who continue to announce expected price increases that are required, ostensibly to ensure the continuation of their normal business activities, but in practice - in isolation from what is happening in the international markets
.
: "Economic literature recognizes a phenomenon known as 'missiles and feathers'. The feathers represent a decrease in input prices that slowly and partially turns into a decrease in prices for the consumer, but on the other hand, an increase in input prices quickly turns, like missiles, into high prices paid by consumers.
The decrease in the global food price index does raise a doubt Regarding the need for food producers and importers to increase prices further, but at the same time, since the global food price index is still higher than last year's level and in light of increases in other production inputs such as electricity, it would be unrealistic to expect price decreases."
A number of Israeli food manufacturers with whom we spoke claimed that the drop in global food prices is temporary, and that the source of the price increases required by them stems from an increase in additional inputs required for food production and processing.
The 'blame' for the continued increase in food prices, however, is not directed only at the producers and importers, but also at the government and what is perceived by social activists as its incompetence in dealing with the issue.
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Alex Tanzer, social activist and chairman of the headquarters for the contractor workers in Israel (photo: Leonid Tkach)
Alex Tanzer, social activist and chairman of the headquarters for the contractor workers in Israel
: "The government is the body that allows food producers and importers in Israel to operate, and the ministries of economy and finance are deeply familiar with the huge profit margins of the large companies.
How is it possible that food prices in the world are falling while in Israel they are falling?
After all, with simple steps such as facilitating parallel imports, along with limiting the major food producers and importers, it is possible to quickly lower food prices in Israel.
But it is not evident from its actions that the government has the will to fight for the consumers in Israel.
The time has come for the representatives of the public in the Knesset and the government to also take responsibility for the meaning of the chair they sit on, and not just for the possibilities that lie within themselves when they sit on it.
And in this aspect, I hope that the ministers and members of the Knesset will fulfill their role in this aspect, and not just use food prices as a propaganda card in the upcoming elections."
We will recall that at the end of last January, the Minister of Finance, Avigdor Lieberman, and the Minister of the Economy, Orna Barbiei, sent a letter to the importers and producers of Israeli food following statements by many of the latter about their intention to raise prices.
Their letter states, among other things, that "we will continue to monitor the prices for the Israeli consumer with the required national responsibility, and in this context we will not hesitate to take the necessary steps to ensure a competitive and fair economy."
The ministers even mentioned in their letter the unusual rate of profitability of the Israeli companies compared to their counterparts abroad, and all this in combination with the strengthening of the shekel against the exchange rates of the main currencies in the world.
Finance Minister Avigdor Lieberman.
The reforms he led are already affecting the prices of some of the components of our food basket (Photo: Reuven Castro)
Relative to the world, our situation is excellent
And what do they say in the treasury?
"The inflation index in the State of Israel reflects one of the moderate price increases in the world over the last year. While the average inflation among OECD countries is over 10.3%, in Israel inflation is only 4.4%. In fact, Israel is the country with the moderate price increase in the world after Switzerland and Japan.
According to organization data The OECD food price index reflects a moderate increase, and so while the increase in food prices is becoming steeper, in many developed countries in the world - in Israel it remains stable and even on a downward trend in recent months.
The structural changes that the Minister of Finance led, including the reform of regulation, imports and agriculture, began to yield Results and we have already seen this in the drop in the prices of fruits and vegetables in June, which fell by 18.6% and 4.9% respectively.
The data presented in the article refers to a very small and specific part of the food products, where we are also expected to see a decrease soon, and this is both thanks to the reforms led by the Minister of Finance and following global changes that the world is experiencing."
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Avigdor Lieberman
