A Guest Post by Dr Harold Goldmeier
Amber Alert for Israeli
Butter Successful
Israel’s butter and ingredients to make butter are on
Amber Alert for almost a year. I believe they are largely being exported to
China and elsewhere including Walmart. In part, Israel is contributing to
China’s food security program thus stabilization. Tnuva might be saving China
from threats to its authoritarian leadership by exporting dairy products.
Butter made in Israel is missing from supermarket shelves
for nearly a year. It is a surprising turn of events since Tnuva is the largest
dairy food manufacturer in Israel. Butter and cottage cheese are the company’s
momma staples. Tnuva sales account for 70% of the country's dairy market. The
Israel Antitrust Authority once labeled Tnuva a monopoly.
State-owned China’s Bright Foods owns a controlling
interest in Tnuva. The behemoth of food security has the power and authority to
order Tnuva management to ship products wherever. The 2014 deal was an early
warning sign from the Netanyahu government fledgling policy of promoting the
wholesale sale of Israeli companies to foreign investors without demands for
job protection for Israel’s workforce for four reasons.
First, government coffers are filled faster this way
because of the huge taxes collected on big deals. Israel’s largest export has
become its businesses relabeled for public relations purposes as investments.
Second, China’s investments and growing trade cement
diplomatic relations in the face of hostility to Israel and undermines the BDS
movement.
Third, the investments in Israel demonstrate Netanyahu’s
commitment to building solid foreign relations in addition to the U. S. and
Europe.
Four, Chinese workers and scientists have reasons to visit
Israel and become boots on the ground witnessing the magical start-up nation
and carrying home the message. Missing butter, however, in addition to lost
jobs, maybe a side-effect of this foreign investment government policy. China’s
self-interests in Israel are threefold.
China enjoys a growing middle class. They buy cars. They
eat more meat and dairy abandoning their vegetarian diet as living standards
rise. China’s dairy products production is sluggish, so the country imports
$10B a year including imports of milk powder, cheese, butterfat, whey products,
lactose and more. China’s imports of U. S. dairy products fell dramatically in
the heat of the tariff war. China does not seem too bothered because its needs
are being met by imports from other countries filling the void. China also
imports Israeli know-how, technology, and equipment like robotic milking
systems for building its dairy farming enterprises. If you want kosher butter
go to China.
President Donald Trump is appropriately using tariffs on
imported goods from China to change its government’s collaboration in
manifestly bad business behavior. China is accused of stealing intellectual
property and takes pride in selling “knock-off” goods at cheap prices. It
devalues its money to ensure cheap exports keep flowing. But the impact of
tariffs is threatening China’s economic and social stability.
A hallmark of China communist authoritarian rule is it
operates on a planned economy. China has been bracing for years for the arousal
concordance of other governments’ antipathy for the pesthouse business
practices. Moreover, though no one anticipates a regime change from Hong Kong
unrest or the deteriorating mainland economy, the Harvard Fairbank Center for
Chinese Studies that I got to know when I was a Research and Teaching Fellow,
published a book review in February claiming the Chinese government has a tight
grip on things but “amid surging protests.” Nothing ensures peace like a
government that can feed its people and fulfills the growing demands of the
middle class.
In retaliation, China announced tariffs on a slew of U.S.
goods. Soybeans, dairy products, and hogs are especially hard-hit. The U. S.
dairy exports by volume to China fell 43% in the past year. China is sourcing
these from Europe, South America, New Zealand, and Israel.
For example, China turned to New Zealand farmers to
supplement the growing middle class’s demand for more dairy products. In 2019,
China’s Yili dairy company bought New Zealand’s second-largest dairy
cooperative, Westland, for an estimated NZ$246M (US$165+M). The largest NZ
dairy company, Fonterra, continues being a preferred supplier to China.
European Union butter exports to China in 2019 are up 13%.; cheese exports to
China are up 20%, more than to any other single destination.
Moreover, China’s Bright Food Group owns the controlling
interest in Israel’s Tnuva Food Industries. Tnuva appears to have stopped
manufacturing butter for the Israeli market claiming it gains greater revenue
preferring to export butter selling at higher prices. Efforts to determine the
destination of butter/dairy exports go unanswered. The longest-running absence
of domestic-made butter from supermarket shelves in Israel cannot be a
coincidence in timing to China’s sourcing alternative dairy.
But things do not always go as planned. In September
2019, the Chinese government seemed worried enough to change policy and loosen
or eliminate (depending on how you translate the term from Chinese) the tariffs
on U.S. soybeans and pork/meat imports as a way of easing internal pressures
and mitigating Hong Kong protests from spreading to the mainland even though
the issues are different. Soybean and hog farmers are President Trump’s
backbone voters and much is written about them in particular including Trump
subsidies (90%) are allocated to states where they have political sway.
So why is a nice, kosher keeping boy writing about pork?
Because pork is a staple of the Chinese diet. Soybean meal is a staple of
China’s hogs. Unrest is growing among the Chinese from economic woes coupled
with stress on the hog herds. The pressure is forcing the government to cut the
Gordian Knot by announcing days ago that tariffs on U.S. soybeans and pork are
being rescinded or will not be raised again (it depends on how you translate
Chinese).
Pork and meat are not simply staples but
obsessions in modern China. Meat and pork consumption are growing among China’s
growing middle class. Pork by-products are widely used in Chinese cooking for
shortening, flavorings, main dishes, and sausages. Pork is the most popular
dish on Chinese recipe shows. And, 2019 is the Chinese New Year of
the Pig.
Pork prices skyrocketed from an epidemic of African Swine
Fever in China. Now into a second year, the Fever is responsible for the
destruction of half the world’s hog population. China’s herd was decimated by
the loss of some 300M. Herd sites are contaminated sometimes for three years.
Adding to the strain are tariffs nearing 62% on pigs. Soybeans and soy meal
imports to feed the pigs were drastically reduced by the trade war.
The Chinese government’s announcement is expected to lead
to renewed imports of American pigs and soybeans and comes none too soon for
both countries. Herds are falling in numbers in America. The U. S. government
is subsidizing soybean farmers. In China, one city is capping prices and
rationing pork. Pork is now a luxury item.
And in Israel, butter is a luxury item. Is cottage cheese
next?
------------------------------------------------------
