The legal adviser to the Ministry of Agriculture published a strongly worded legal opinion earlier this week arguing that the dairy sector reform promoted by the Ministry of Finance cannot be brought for approval by the Knesset in its current format. The adviser, Ariel Kahan, wrote the reform in its current format lacks sufficient factual support, contains a series of substantive flaws, and risks harming the fundamental rights of dairy farmers. He emphasized that “there is a substantial legal difficulty in advancing the reform in its current form without the required adjustments.”
The Ministry of Finance said in response: “The Ministry of Finance will continue to lead the dairy reform to its full approval in the Knesset.”
The dairy reform, which has faced sharp criticism by farmers, was approved on Friday as part of the state budget and the Arrangements Law for 2026. Prime Minister Benjamin Netanyahu and most government ministers voted in favor. Only Agriculture Minister Avi Dichter opposed it, while Ministers Itamar Ben Gvir and Amichai Eliyahu abstained.
The reform includes a full cancellation of government planning in the dairy sector. For decades, the state has determined the production quotas and the target price for dairy farmers, supervision that will now come to an end. The reform also opens the market to imports of dairy products and cancels tariffs in the hopes of increasing competition and lowering consumer prices.
Kahan’s document presents a troubling picture of what is happening behind the scenes: a broad structural reform that could fundamentally transform Israel’s dairy industry is being advanced without sufficient data, without orderly empirical examination, and without basic protective mechanisms required in any economic change of this scope.
According to the legal adviser, the proposed reform contains three main flaws. First is a deep lack of readiness to carry out the reform. There is no in-depth data on the effect of the price reduction, on expected revenue volume, on local production, on imports, or on consumer prices. These are the data needed to substantiate the achievement of the outcomes the reform seeks.
Second is substantive defects in the reform mechanisms: transitional tools, oversight mechanisms, and alternatives are missing.
The final flaw is a possible violation of basic rights of dairy farmers, without a proper and proven purpose and not in a proportionate manner. Violations include harm to the property and dignity of farmers.
Cancellation of tariffs without government support
Kahan’s opinion focuses on core issues in the reform, such as reducing the target price (the price paid to the farmer for raw milk), canceling planning in the dairy sector, and canceling tariffs on dairy products. In addition, there are secondary issues that, in his words, have far-reaching implications. These issues, he wrote, “were not discussed at all in the manner required for presenting them to the government.”
Kahan added that such decisions must be made after weighing all relevant considerations. “It is inconceivable that the government would make a decision that reshapes an entire agricultural sector without presenting a factual basis, impact assessments, and forecasts, as required in any other economic field,” he wrote.
One of the most dramatic clauses in the reform is the immediate 15% reduction in the price paid to the farmer for raw milk. According to the legal opinion, the reform presents no professional justification for the percentage of the reduction, no calculation of its consequences. In certain scenarios, Kahan wrote, 50% to 90% of dairy farms may soon find themselves facing losses.
Moreover, farmers will be forced to absorb losses in the first months even before they can redeem quotas at all. The effect, Kahan argued, is harm to property and human dignity that is not proportionate—and may lack a proper purpose.
Another clause raising significant concern is the Finance Ministry’s intention to completely eliminate tariffs on dairy imports without government support or an alternative protective system.
Professional disagreements
The legal adviser pointed to professional disagreements between the Ministry of Agriculture and the Ministry of Finance: according to the Ministry of Agriculture’s professional stance, eliminating tariffs without direct budgetary support for farmers—protection common worldwide against imports from far cheaper countries—will lead to a complete collapse of the sector. This may result in an almost certain collapse of a large part of the local industry, as production costs in Israel are significantly higher than in importing countries.
By contrast, the Finance Ministry’s professional assessment found that a reduced target price, elimination of tariffs, and cancellation of planning would result in the local dairy sector shrinking by only a third. It anticipates that prices will eventually fall as expected—although the Finance Ministry itself admits the move’s impact on consumer prices will be limited.
Although this is a professional disagreement rather than a legal one, the legal adviser says the professional gaps are significant and the consequences that may result from implementing the reform are dramatic. These disagreements make it very difficult to submit the decision without deep examination and without exhausting this factual professional dispute so the government can consider and decide in an informed manner. The legal adviser stressed: “It is self-evident that it would not be right to determine ‘who was correct’ after the fact, since then, should the forecasts of the Agriculture Ministry’s professionals be confirmed, it will no longer be possible to turn the clock back.”
No answers
The legal opinion reveals that the government has no answers to essential foundational questions required for an informed decision, such as: how many farms are expected to close? What will be the impact on food security? What will happen in a global crisis? How will employment in kibbutzim and moshavim be affected? What is the true cost to the economy? What is the impact on industry and logistics? What alternatives does the government have to achieve the goals of the reform?
“The reform lacks any quantitative or computational data or any database on which to rely regarding the benefit that will accrue to the consumer as a result of its implementation,” the legal adviser wrote. “How can the government decide to cut a third of the local dairy industry—and perhaps even more—without knowing, in a calculated and grounded way, what benefits will accrue to society as a result?”
Although the legal advisory team of the Agriculture Ministry agrees that lowering the cost of living is important, the legal adviser clarifies that it is not the only benefit important to the public in Israel. “The dairy sector has additional benefits, and in this context, the reform does not address the consequences of closing dairy farms on sources of employment in the periphery, land use, and the consumer implications of dependence on imports after the local sector is reduced,” Kahan wrote. In the absence of these data, he stressed, it is impossible to exercise reasonable discretion—a minimal condition for a government decision.
The opinion highlights three additional substantive legal flaws. First, the reform applies competition only to dairy farmers: according to the proposed reform, the Competition Law will apply only to milk producers and not to other sectors. The legal adviser points to a violation of the principle of equality.
Second, the reform requires that any future amendment to the Dairy Law receive the finance minister’s approval. Kahan states that this is an unprecedented move that does not align with the government’s procedural rules and may harm the independence of the Ministry of Agriculture.
Finally, Kahan wrote, the reform does not address the goat and sheep milk sector, yet it also eliminates tariffs on dairy products in this sector. This was done without prior professional examination, without an impact assessment, and without evaluating whether the sector can survive without a target price and protective tariffs.
The legal opinion of the legal adviser to the Ministry of Agriculture states unequivocally: the reform in its current format is not ready, as it lacks data, raises substantial legal difficulties, and may harm fundamental rights. “Any deep structural change in the dairy sector requires a solid database, an orderly transition system, empirical examination, protection for dairy farmers, and protection of Israel’s food security,” Kahan wrote. “In the current situation, none of these exist.”
