Israeli government policy causes peppers price to skyrocket

The Israeli peppers industry was once one of the strongest in the country, but in recent years it has hit a rough period with profits steadily dwindling due to overproduction and a poor outlook in the export markets. After much turmoil, roughly one year ago, the Israeli government enacted a policy to support struggling pepper growers which provides them with financial support to switch away from peppers into other crops. The result has been a major spike in the price of peppers in the local market caused by limited supply. Today peppers are sold at around 2.4 Euro per kilo, up almost 100%.

The spike is a direct result of the government's policy decision according to a veteran grower from the Arava region in the south of Israel. "The government had other ways to support growers. They chose to provide grants in exchange for farmers decreasing the growing areas." In doing that, the policy was quite successful; a total of some 25 million Euro was used to decrease the growing area of peppers by 40%. The price spikes and generally high pepper prices has been an unintended consequence.

The government's action came on the back of continued struggles for the peppers industry, which peaked after the economic crisis in Russia nearly eliminated the export to that market. Combined with a difficult market for export in Europe, much of the peppers production was directed to the local market which led to lower prices and consequently to lower profit for the growers.

The majority of the growers who received the government's support converted their pepper growing operations to dates, which are primarily grown in the same regions and have been the most lucrative industry for Israeli agriculture. A move to date production is a long term one, leaving a question mark regarding the peppers industry's ability to meet the local market's demand. "In practice, the government could have given loans or financial support to growers without demanding that they cut back on their peppers production. The prices are high right now because fewer growers are growing peppers and that is how it will be."


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