Raw Milk Prices Drop 5% But Consumer Dairy Costs Remain High Until November
Since April 1, the price of raw milk, which dairies pay to farmers, has fallen by 5%, marking the first significant drop since the sector's automatic pricing mechanism was introduced in June 2022. Despite this decrease, consumer prices for dairy products have not declined and remain elevated after rising up to 4.8% two months ago. This discrepancy is due to the pricing update schedules: raw milk prices adjust quarterly, while consumer dairy prices under regulation update annually or semiannually depending on the magnitude of change, with the next consumer price update scheduled for November.
The raw milk price for the third quarter was set at 2.33 shekels per liter, down by 12.46 agorot, translating into an estimated annual savings of about 200 million shekels for dairies, which purchased approximately 1.6 billion liters in 2025. However, consumer prices for regulated dairy products increased by 1.05% in May, driven by a retroactive charge and despite a slight decrease in the current price component. Non-regulated dairy products saw even higher price hikes, with companies like Strauss, Gad, Tnuva, and Tara raising prices by 1% to 4.8%, and retailers adding further increases, including Carrefour's 16% rise on Strauss cottage cheese.
The raw milk price surge last year was mainly due to drought and poor crop yields, but improved rainfall and better corn harvests this year have contributed to the recent price decline. Economists expect this downward trend to continue in the October update, potentially leading to consumer price reductions in November. However, there is uncertainty whether dairies will lower prices on non-regulated products as quickly as they raised them earlier.
Since September 2022, dairy prices have consistently risen, with a 25% increase in raw milk prices over five years. The automatic pricing mechanism, replacing ministerial discretion, was designed to stabilize prices but has so far coincided with ongoing consumer price increases. The Finance Minister negotiated to limit the initial 16% consumer price hike in May 2023 to 9.3%, with subsequent smaller increases continuing through 2024.
Key industry figures include Strauss CEO Shay Babad and Central Company CEO Nir Levinger, who oversee major dairy producers involved in these pricing dynamics.
