Updated: Apr 5
Butter is one of the most commonly used dairy products. Unfortunately, since early 2019, butter has become such a scarce commodity that Israelis have taken to share sightings of it on social media. As in the Soviet Union under Soviet rule, so is Israel in 2020 - no butter could be found on the shelves for weeks at the time. How did we reach this level of basic food shortage in the Start-Up nation?
Why is there a shortage of butter?
The dairy market is one of the most regulated markets in terms of quantity and prices.
Like in the Soviet Union, the price of dairy products isn't set by the market but by a cooperative board composed of dairy farmers and government officials.
Those "planned" prices are the main reason, Israel is facing a shortage of butter.
In a normal economy, this shortage would have been solved by allowing prices to increase for a while until new entrants arrived on the market and drive the price back down. However. in Israel, such price mechanism doesn't exist and to make things worst, imports of butter are limited by stringent quotas and high import taxes (120-160%)
The price of butter is set at a price too low for local farmers to increase production. In light of the gravity of the situation during 2019 and the fear of political backlash, the government allowed for quotas to be temporarily lifted on butter. Unfortunately for the Israeli consumers they also imposed the controlled price on foreign butter and evidently fail to attract new supply.
It took a full year for the government to be ready to let foreign products be free of the controlled price and indeed some of them have begun to appear on store shelves. This improvement would have been much larger if customs on butter had been relaxed at the same time as the government increased the quotas.
But at least for the time being, we can enjoy again our favorite butter!