According to reports from the country, the Israeli Ministry of Finance intends to cut current custom duties on dairy products. It hopes that the move will encourage the import of foreign dairy products and increase competition in the country’s monopolized dairy market.
The Ministry expects that an increase in competition will offset the impact of the recently announced 9.5% raw milk price increase. The Israeli Ministry of Agriculture-driven raw milk price increase is expected to result in a 5% increase in dairy product prices in the country.
Rabobank’s Mickey Teunissen told DairyReporter.com that the market, with its high production prices, holds some potential for global dairy brands.
But the import duty reduction is likely to have little impact on dairy market competition or prices, Teunissen added, despite the best efforts of the Israeli Ministry of Finance.
Potential, but too small
“If you look at production prices in Israel compared with a country like the Netherlands for example it is quite high,” said Teunissen.
“They hope that they will open the borders and there will be a bit more competition which will reduce the current prices.”
“Prices will decline, but we don’t think there will be an influx of firms entering the Israeli dairy market. We don’t see there being any real increase in imports into Israel.”
According to Teunissen, the Israeli dairy market is very small - at just 1.2bn litres. He believes that although there is potential there considering the country’s high production prices, foreign investment is unlikely.
“The market is just too small for it. I cannot see the impact being as great as the Ministry of Finance had hoped for.”
Conflict of interest
Teunissen added that any entry into the Israeli market would likely be a conflict of interest for many established global dairy brands.
“There would also be concerns about the already big market for dairy products in the Middle East,” he said.
“Many dairy firms already have established business in the Middle East and countries such as Saudi Arabia, Iraq, and Iran. So having any kind of business interest in Israel could be difficult.”
“They would probably have to choose one or the other,” Teunissen concluded.
DairyReporter.com contacted both the Ministry of Finance and the Israeli Dairy Board, but nobody was available to comment on the plans.