Farmers in the Periphery: Bennett’s “Mighty Agricultural Cartel Lobby”

Naftali Bennett is very proud of single-handedly breaking “the mighty agricultural cartel lobby” and lowering the cost of food in Israel. As someone who has lived in the Arava desert since 1987, I still don’t know who or what this “mighty cartel” is.

Israeli land laws, much maligned because of the corruption and bureaucratic nightmares that come with them, began with very good intentions: Land is leased by the active farmer to prevent absentee landlords, and inheritance laws in the moshavim (family farms) prevent breaking up the land into plots too small to support a family.  These laws were created with problems of early 20th Century peasants in Europe in mind. In modern times, they mean that Israel does not have huge agribusiness controlling food production, but hundreds of small and medium-sized farms run either by individual families or by kibbutzim. Most of these are located in the periphery of the country, along the borders, as this map of the dairy industry shows.

I will concentrate today on the dairy industry, which in recent years has received the most negative focus. Israeli dairy farms range in size from  individual family farms to partnerships of up to 3 cooperative herds. Reforms in dairy farming over the past 20 years have encouraged individual farmers to form partnerships or to sell their quota back to the dairy board, because very small farms are highly inefficient. But farm size is limited to partnerships of up to three kibbutzim (about 300 families), herds of 600-900 cows producing up to 10 million liters of milk a year. That is, each family “owns” about 3 cows, unlike in the US, where 25% of the milk is produced in 2,000+ head herds owned by one family.  This is the “mighty agricultural cartel lobby” of the dairy farmers – people living along the borders, each owning 3 cows, getting along with their neighbors well enough to cooperate and work efficiently.

Israeli dairy cows are the highest producers in the world, but our milk is not the cheapest; unlike in countries with both land and rain, we  have to get the most out of every dunam of land and liter of water. Through research and capital investments we have managed to meet nearly all the dairy needs of the population despite our lack of natural resources. So why bother? Why not just import food that can be produced more efficiently someplace else?

The first answer is food security – do we really want to depend on Europe, the US, or any other country for our basic food? But I will concentrate on a different reason: local economy. Agriculture is only about 2% of our GDP, but in peripheral areas of the country it is the main source of income. More than 50% of the income in the Southern Arava, for example, comes from farming, mainly dairy, dates, and vegetables. While this region includes fewer than 4,000 residents, it encompasses 10% of Israel’s area, including 200 km of  border. The situation is similar in the Central Arava and the Negev. Without the economic base of agriculture we would not be able to hold our borders.

The average salary in the Southern Arava is NIS 7,000 a month — much lower than the rest of the country. Through cooperation we manage to reduce our living expenses and improve our quality of life, allowing us to have beautiful gardens, swimming pools, and high quality child care at a relatively low cost. (As an aside, I highly recommend this; if 100 families in Tel Aviv were to cooperate, they would not have a problem of who takes care of the children in August!). Without cooperation, we would not survive. No one of us is strong enough to pack, market, and transport our goods to the rest of the country and abroad alone, upholding international health and quality standards and competing against foreign producers. The pepper farmers of the Central Arava thought that marketing individually would work better for them – and lost the European market to the Spanish cooperatives. Today they are struggling to get by.

The last question is about food prices. Israeli food prices are connected to the global market. While nearly all of our eggs, poultry, and dairy are locally produced, 97% of our grains, which are the main cost of producing these products, are imported. So it should not come as a surprise that our food price index is pretty close to that of the OECD. Actually, through the 1990s our prices were lower, with another dip in the mid 2000s. Since 2008, the Israeli and OECD price indices have been very close. The general consumer price index rose faster in Israel than in the OECD in the 1990s, slowed down in the 2000s, and since 2008 has been similar to that of the OECD. That is, we enjoyed relatively low food prices in the 1990s, which felt even lower in comparison to our other expenses; now all expenses are in line with the OECD. (An important question, of course, is how much we earn – but that is beyond the scope of one blog.)

Finally, regarding Bennett’s claims: 1) He is referring to the changes anti-trust laws, from which agriculture was exempt. The changes refer almost entirely to marketers, rather than farmers, and were introduced my Labor MP Miki Rosenthal in 2013. As a farmer, I don’t see selling vegetables in Tel Aviv as agriculture. If you want to talk about marketing lobbies, please call them such. (2) The law goes into effect in 2015, so no matter how good or bad it is, it did not effect prices in 2014.

I’m still looking for the “mighty agricultural cartel”. I guess it’s farther down the marketing chain than the farmers. I invite all those who think farmers are getting rich on the back of the average Israeli citizen to to come down to the Arava and join us living the high life.

Source: http://stats.oecd.org/Index.aspx?DatasetCode=MEI_PRICES