"Without legislative change, the dairy market will remain the same - a cartel," stated the Jerusalem Institute for Market Studies in a market research study published today after examining the Israeli dairy market. "The antitrust law does not apply to growers and wholesalers of agricultural produce, thus forming a cartel."

The study also said that, "The Ministry of Agriculture and Rural Development's budget proposal explicitly states that: 'The exemption in the current format allows those marketing agricultural produce …to create organized cartels, to coordinate activities and to use their market power to bring about a rise in consumer product prices."

The Jerusalem Institute for Market Studies explains that excise on raw materials used in the dairy industry (milk powder and butter) and on milk end products is extremely high: 150-200%, which effectively prevents the import of these products.

The study also said that, "According to the Dairy Industry Planning Law that was recently enacted, there are restrictions that make import difficult. Currently, dairy products can only be imported if they are not dairy raw materials or if not more than 50% of its weight is dairy raw material."

The Jerusalem Institute for Market Studies claims that as a result of these restrictions, , the price of a container of Tnuva Food Industries Ltd. cottage cheese doubled within the past five years when price supervision was removed from cottage cheese. "Dairy producers Tnuva, Strauss Group Ltd. (TASE:STRS) and Tara enjoy this high revenue from cottage cheese sales. They receive the largest part of the price: NIS 2.99 is 41% of the final price to consumers of NIS 7.29," the report said.

"Over the past three and a half years, beginning in January 2008, the consumer price rose 39%, whereas the price that dairy producers paid for milk (price target) rose only 3.8% during this period," the report said. "Hence we can see that the final price to the consumer increased ten times as much as the price dairy producers paid."

The Jerusalem Institute for Market Studies recommends, "Applying the anti-trust laws to growers and wholesalers of agricultural produce, and to gradually cancel the excise imposed on these products." The Institute also recommends canceling ineffective government supervision, and increasing the number of international trade agreements with additional countries, as well as affecting legislative changes in the Dairy Industry Planning Law to permit restricted imports.

"The government must take action to reduce taxes for all food products, including milk and cheese products," the report concluded.

Published by Globes [online], Israel business news - www.globes-online.com - on July 6, 2011

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