The reform is expected to reduce the cost of dairy products, to open up the economy to gradual imports, to save hundreds of millions of shekels a year for the economy and hundreds of shekels a year for the family (1 shekel = $0.27).
Kahlon said, "Last night we signed a historic reform in the dairy market that will significantly reduce milk prices for Israeli citizens, improve the dairy industry and develop it into healthy competition, alongside measures designed to protect the Israeli farmer. I congratulate the farmers and the heads of the organizations on the signing of the agreement that brings great news to the citizens of Israel in the struggle to reduce the cost of living."
Benefit for consumers
Ariel called the agreement ‘groundbreaking’ and said the deal will benefit both farmers and Israeli consumers.
“The agreement is part of the Ministry of Agriculture's policy to strengthen the dairy sector and to sign a dairy export agreement for China, and we continue to work to strengthen the Israeli farmers and the Israeli local production we are so proud of," Ariel said.
Chairman of the Israel Farmers Association, Meir Tzur, said, "My goal in reaching an agreement was to preserve the family farm, the entire dairy giant in agriculture and industry, and indeed we kept the family farm, the dairy industry and the local industry.
“We promised local production in its present quantity with a certain growth for the next ten years."
As part of the steps, at the beginning of 2019 customs duties on dairy products will be reduced by about 40%, and further reductions will occur, until a reduction of about 65% in customs.
The agreement provides for the protection of the dairy industry and its planning for the next eight years. The cost of the agreement is NIS 450m ($121.5m).
It was also decided to reduce the target price of raw milk, so that at the end of the process the price of milk fell from NIS 1.92 ($0.51) to NIS 1.69 ($0.46), a decrease of 12%.
In return, dairy farmers will receive direct support to cover most of the price drop. After the reduction, crude milk prices are expected to be similar to those in Europe, the government said.
Currently, the government said, dairy products in Israel are among the most expensive in the world, due in part to the large number of dairy farms and the lack of grazing areas.
The deal is expected to significantly lower the prices of supervised dairy products such as milk, yellow cheese, and cream, as well as unregulated products.
The NIS 450m grants will be earmarked for maintenance of existing farms, to encourage the construction of large and efficient dairy farms, retirement grants and the establishment of partnerships, in order to contribute further to further price declines.
In order to protect the agricultural sector, a temporary freeze on the reduction of tariffs will be possible if the volume of milk production in Israel is negatively affected. In addition, in order to allow the market to balance between seasons, it was decided to open butter and milk powder in duty-free quotas and not to impose tariffs on them as much as on other products.