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Microsoft word - israel report corr.doc

Project no. SSPE-CT-2004-502457
Project acronym: EU-MED AGPOL
Project full name: Impacts of agricultural trade liberalization
between the EU and Mediterranean countries
Instrument type: Specific Targeted Project
Priority name: 8.1 Policy-oriented research
Deliverable D06
Characterization of the Israeli Agricultural Sector with Special
Emphasis on Fruits, Vegetables, and Processed Foods
Due date of deliverable: May 2005 Actual submission date: September 2005 Start date of project: 01 March 2004 Duration: 36 months
Organisation name of lead contractor for this deliverable:
Jerusalem University
Project co-funded by the European Commission within the Sixth Framework Programme (2002-
2006)
Dissemination Level
PU Public PU
Restricted to other programme participants (including the Commission Services) RE Restricted to a group specified by the consortium (including the Commission Services)
CO Confidential, only for members of the consortium (including the Commission Services)
This Report has been written by Amir HEIMAN and Yacov TSUR, Jerusalem
University.

Table of Contents

Part 1 – The determinants of agriculture and the agro-industrial sector. 4
A. Natural Resource endowments . 4 Agricultural sector in the Israeli Economy. 4 Land Use . 5 Water. 7 Water Pricing. 11 Administrative steps reduction of quotas . 12 Employment . 14 B. Principal characteristics of agro-ecological zones . 15 Climate Classification . 15 C. Farm structure . 20 D. Agro-industrial structure overview . 22 E. Organization of the professionals in agriculture and agro industry . 23 Ministry of Agriculture and Rural Development . 23 The Agricultural Extension Service. 27 F. Infrastructure – roads, electrification, communication and ports . 27 Transportation . 27 The Israeli railway system . 28 The percentage of ownership of durable goods by Households in population. 32 Education . 34 Summary . 35 G. Marketing system . 36 Production . 36 Storage. 36 Marketing. 36 Wholesalers. 37 Brokers . 37 Food retailers and supermarket chains . 37 Open markets. 37 Specializing fruit and vegetable stores and green grocers . 38 Part 2 - Evaluation of agriculture performance. 39
A. Trends in overall patterns yields and production of major crops. 39 B. Agriculture output value by purpose . 42 C. Trends in major crops production . 47 D. Trade by Destination . 50 Import and export of agriculture fresh products . 50 Part 3 - Marketing system of fruit and vegetables . 56
A. Organizations . 56 B. Marketing margins and mark ups . 60 C. Revenue and profit (loss) for selected vegetables and fruits . 62 D. Revenue and cost per Dunam. 64 E. Consumption of fruits and vegetables. 65 F. Calorie consumption balance 2003. 65 G. Dependence in imports factor . 66 H. International comparison . 66 Part 4 - Evaluation of Agri Industrial performance . 68
A. Import and export of fresh and processed food . 68 B. Export and Import of Beef and Poultry including shell eggs. 72 C. Export and Import of dairy products . 72 D. Supply of fresh vegetables and fruit to factories, by use of the processed produce: . 72 E. Analysis . 73 F. Special Section -Focus on Tnuva the largest dairy producer. 75 Part 5 - The Food retailing system in Israel. 76
Part 6 - Agricultural and agro industrial policies. 77
A. Brief history of major policy developments . 77 B. Economic situation and its effects on the agricultural and food sectors. 78 C. Governmental Support . 78 D. International trade policies. 78 E. Main aspects of protocol No.1 . 79 F. Main aspects of protocol No.2 . 80 References . 82
Sources . 82
Part 1 – The determinants of agriculture and the agro-industrial

A. Natural Resource endowments
Agricultural sector in the Israeli Economy
Israel's population has increase from 4.5 millions in 1990 to 6.3 millions in 2002 (40% in 12 years or 2.84% annually). In contrast, the agricultural sector steadily declines -- from 186,000 workers in 1990 (4.12% of the population) to 157,000 in 2002 (2.5% of the population). The share of agriculture in Israel's GDP has stabilized at about 1.65% after consecutive five decades of decline. In 1950 the share of agricultural output was above 50% of total GDP – most of it originated from citrus export to Europe. These trends are common in developed nations and were exacerbated in Israel due to water scarcity. In addition, a political change in the late 70s was unfavorable for agriculture and led to cessation of subsidies to the agricultural sector as part of the change in national priorities – way beyond international trade requirements, such as those of the GAAT or WTO. Myopic management of water resource increased overall water deficit led to an increase in water prices and a decrease in agricultural water allowances. This together with the reduction in agricultural subsidies reduced the number of active farmers and the weight of the agricultural sector in the national economy. On the other hand, it forced the remaining growers to become more efficient. We will discuss these changes and their effect on the agricultural sector in details in part 5. Table (1) presents the share of the agricultural sector in inputs and outputs: Table 1 - Agriculture share in Israel's Economy (% of total)

1995 1997 1998 1999 2002 2003 Product 2.1 1.8 2.0 1.6 1.7 1.6 3.6 3.3 3.3 3.3 2.5% 19.0 19.0 19.1 18.3 64.1 64.5 62.8 59.6 Sources: Statistical Abstract of Israel 2000 No 53, Statistical Abstract of Israel 2004 No 55. From the Ministry of Agriculture and Rural Development website, "ISRAEL AGRICULTURE, facts and figures" by Dr. Arieh Sheskin and Dr. Arie Regev, www.moag.gov.il Table 1 indicates that although the share of production and employment decreases over time, the share of export increases. The share of investment decreases less than the share of production and this supports the long-term efforts to change the cropping patterns toward higher-value and water-saving crops. Table (2) provides information on natural resources endowment in the years 1990, 1995 and 2002. Table 2 - natural resources endowment in the years 1990, 1995 and 2002
Unit 1990 1995 2002 2,214 2,214 2,214 2,171 2,171 2,171 Arable & Permanent Crops 1000 4,514 5,349 6,304 Population annual growth Agri Pop annual growth Total population / Arable land Total Agri Population / Agricultural Area cultivated land per capita (Ha) Source: FAO (Food and Agriculture Organization of the United Nations) Statistical Databases website, http://faostat.fao.org Total agricultural area in Israel has been fairly stable over the years around 566,000 hectares, which is about 26% of total land area – far beyond the share of production and employment. The high share of land use in a crowded country indicates the importance of agriculture beyond its commercial value. About 182,000 hectares are irrigated and this share has also been stable over time. Water has been always a scarce resource in Israel and since 1999 it became critical. The water crisis is so acute that it threatens the existence of parts of the agricultural sector in Israel. The ministry of treasury is leading a course aimed at changing the pricing and allocation of water. In essences this course has a goal of charging growers with the marginal cost of water production, including scarcity cost. Currently the agricultural sector pays on average less than a half of the production and conveyance cost. The water crisis in Israel is discussed in details in section (A3). Israel has six natural regions: Upper Galilee, Western Galilee, Northern valleys, Central region, central plain and mountain, and the Negev Desert. The Negev Desert, located in the southern part of Israel captures more than 50% of Israel's area (see attached map). Table 3: Land Use in Israel 1990-2002 at 1000 Ha
1990 1995 1996 1997 1998 1999 2000 2001 2002
Arable & Permanent Crops Forests And Woodland Non Arable & Non Permanent Source: Rural Planning Authority, Min. of Agriculture and Rural Development, 2003 The size and the proportion of agricultural area from the total land area did not change much over the last decade. The constant proportion of land which is designed for exclusive usage for agricultural purposes is part of regulation aimed to preserve agricultural land and avoid urbanization. The slight decline in the size of arable land results from special cases of kibbutzim that over the time became surrounded by large cities increasing the alternative cost of agricultural land beyond sustainable level. Table 4 - Irrigated and unirrigated land; Land by Agricultural Use: 1994/5- 2001/2002 (in
1000 ha)
1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 Grand total
Crops area - total
194.3 192.4 194.3 198.6 192.1 190.3 182.2 181.6 166.3 158.6 159.4 161.8 135.9 144.2 169.8 173.5 82.3 83.0 82.7 83.7 84.8 88.9 84.3 84.2 55.8 49.7 51.5 53.8 55.5 55.1 54.4 59.9 218.4 213.9 214.8 218.0 182.5 185.0 208.0 205.8 Source: Agriculture in Israel (the Industry Account, Area and livestock, Price Index of Output and Input) 2001-2003, central bureau of statistics of Israel September 2004, Table 1. The size of the land used for agricultural production declined by 5000 hectares during the last 7 years (an annual decline of 1.4%). The main changes are the proportion of unirrigated land that increases due to water shortage and the increase in the area used for production of high value crops such as vegetables and the parallel decrease in the low value field crops. Figure 1 Agricultural area in Thousand Hectares
crops area
grand total &
irrigated &
Crops area (dunams) - total Source: Agriculture in Israel (the Industry Account, Area and livestock, Price Index of Output and Input) 2001-2003, central bureau of statistics of Israel September 2004, Table 1. Figure 2 Agricultural area in Thousands Hectares by
1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 Source: Agriculture in Israel (the Industry Account, Area and livestock, Price Index of Output and Input) 2001-2003, central bureau of statistics of Israel September 2004, Table 1. Water scarcity is a main limiting factor of the Israeli agriculture. Three main water resources supply most of the water demand for agriculture, domestic and industrial use. The Sea of Galilee, from which an average annual quantity of 400 million cubic meters is pumped to the Negev, the coastal aquifer and the mountain aquifer. Annual average prescription is 610 mm (154 years average) with very high spatial and temporal variability. Arid years receive around 300 mm of rain. The rainy season lasts from October to April. The annual quantity of rain is measured in three geographical areas: the coastal region, central and mountain region, and the Jordan valley. The annual average rain is in the range of 800 mm, in the north, to 25 mm in the Negev. Haifa (north cost line) enjoys 536.3 millimeters (mm), Jerusalem (interior Israel) has an average of 554 mm. More than half of the area of Israel is in Negev getting less than 200 mm annual rainfall. The sharp increase in the population of Israel due to in-migration1 and high fertility rate increased the demand for water while water supply stayed constant. In 1998 total water demand exceeded sustainable supply (based on average natural recharge) by 212 million m3 and in 1999 by 317 million m3. Table (5) depicts water consumption by use in all sectors. The total consumption increased monotonically from 1950 until 1999 reaching the peak level of 2164 million cubic meters. The agricultural sector has an important role in the growing demand. In contrast to the agricultural demand, domestic per capita consumption has increased modestly, and the industrial consumption remained constant. Table 5 - Water usages 1986-2003 and forecast for the year 20052
Year Agricultural
Household3 Industry Total Sources: http://courses.agri.huji.ac.il/71721/kislev-atlas2.pdf, Heiman, ( 2002). In 2000, in an effort to balance demand and supply of water, the water commissionaire reduced the agricultural water quota to 1137 million cubic meters (from its 1365 m3 peak in 1998) and in 2001 an additional cut of 75 million m3 was imposed on growers. Table 6 and Figure 3 presents the consumption per capita and consumption per capita by usage sector. Since 1999 the consumption per capita of water by the agricultural sector decreases as a result of population grows and reduction in fresh water quotes. 1 More the 1 million Russian immigrants Jews during the 80' s (20% increase in the population in three years) and steady immigration rate of 60000 (1%) per year in the following years. 2 a. Numbers in prentices are taken from the Ministry of Agriculture, the research and development department (November 1999). These numbers do not always agree with the figures provided by the water authority (1999). b. Total consumption includes 195-235 million m3 that are transferred to Jordan and Palestine. Kislev and Veksin (1997) argue that rain water potential is about 2000 million m3 and additional quantity should come from residual water (recycling and salty water) or desalinized water 3 Measurement of water consumption by households includes the individuals' usages plus watering of gardens. Table 6 - Water per capita consumption and per capita consumption by usage sector
Year population
Household[1] Industry Total Fig (3)-Per capita water consumption
Years 200
Agricultural usage Sources: http://courses.agri.huji.ac.il/71721/kislev-atlas2.pdf. Calculated from the Water Commission report 2004, The Research and development department (September, 20, 2000), A report submitted to general manager of the agricultural ministry Table 7 summarizes water supply by source for the years 1990 and 2000-2002, and Table 8 presents water balances (input and output). In 2000, the excess of demand was addressed by increases in pumping from the Sea of Galilee. This choice was far from being optimal and the lack of Galilee dried and lost its attractiveness as a vocational place. Table 7- Water Production by Source and Supplier ( million cum)
Production
Mekorot Water Co.- total Other producers – total From the National Water Carrier(HaMovil, Kinneret) Surface water Calculated from the Water Commission report 2004, Table 12 (Detailed figures are presented in Annex) The overproduction of water in 1997-2001 caused a severe deficit in water resources. In 2002-2003 the water annually sustainable water supply finally exceeded due to favorable rainy years and additional reduction in the agricultural quotas. Alas, the two rainy years did not succeed to fully compensate for a prolonged overdraft, which led in some cases to an a deterioration of water quality and salinization of aquifers – particularly the coastal aquifer. Table (8) presents water extraction and recharge and the ensuing deficit for the period 1997-2003. Table 8 - Input, output and deficit in the market of water for the years 1997-2003
Year
Deficit-/surplus + Source: Calculated from the Water Commission report 2004. The water commissionaire had adopted 4 measures aimed at handling the water crisis: a) increasing the price of water, b) reducing irrigation water quotas, c) encouraging households to save water and d) building infrastructure for water desalination. Water Pricing
The price of irrigation water varies with quantity consumed but not with location. Farmers pay about $0.18 per m3 for the first 50% of their water quota, $0.22 for the next 30% and $0.30 4 Excluding production from drilling for Dan Region Sewage Reclamation Plant. 5 Including Dan Region Sewage Reclamation Plant for the last 20% (1995 prices). Industry pays about $0.22-$0.25, and households pay on average $1 per m3 (with high variability among municipal districts, towns and cities). The price of irrigation water has barely changed since 1948 until mid 70 ‘s. In 1973 the price of irrigation water raised by about 5% and in 1976 it increased sharply by about 26%. The 1976 price were held constant until 1980. In 1980 Prices rose again by about 20%, then reduced until 1986, at which time irrgiation water quotas had been reduced by 10% and water price rose again. In 1991 the price was raised again by about 24%. The increase of prices of water for agricultural usage in 1986 and the reduction in the quotas allocated decreases the consumption the agricultural sector by 28% (16.4% in addition to the administrative steps). In 1995 growers paid 0.484, 0.584 and 0.783 NIS for the first 50% of their quota, 51% to 80% of their quota and above 80% or their quota, respectively. In 2002 these tier prices (for the same quota shares) almost doubled to 0.892, 1.07 and 144.3 NIS respectively (the dollar to NIS exchange rate changed during that time from 3.3 to 4.4 -- a rise of 33% and the euro to NIS changed by 42%). The real increase in water price (taking both inflation and exchange rate into consideration) deteriorated the profitability of agricultural growers both in the domestic and export markets. Administrative steps reduction of quotas
According Israel's water law of 1959, water permits and prices are determined administratively by the water commission, and are changed annually according to precipitation and various needs. About 65 % percent of the water is supplied by a single company – Mekorot, controlled by the government, and the rest by independent suppliers. Water suppliers receive extraction permits with specific and detailed quotas from the Water Commission (Kislev and Rosental, 1997). The ministry of agriculture, then, determines water allocated to the different crops by employing a strategy aimed at: (1) minimizing the long-term damage to the produce and (2) allocation of water according to their marginal value of production. In 2001 the Water Commission together with the Treasury and Agriculture Ministries agreed that the irrigation water allocation from potable sources will be reduced by 50%. The annual cost to growers due to this reduction was estimated to be around 2.0 billion NIS (0.5 billion USD). After the implementation of the new policy the Israeli agricultural sector lost 0.05 million hectares6. 9000 hectares of orchards were uprooted and 15,800 employees lost their jobs7. Potable water allocation for cotton and wheat has been reduced drastically (leaving these crops to rely on recycled water and precipitations), vegetables (including potatoes) lost 30% and fruits (including citrus orchards) lost 20% of their fresh water quotas. The ministry of agriculture demanded that farmers should be compensated for their loss of income by 1 NIS (about $0.22) per m3 or quota reduction. The Treasury Ministry resisted and an agreement was finally reached to a 29% reduction of the 1999 quota. 6 One of the informal benefits of agriculture is that it occupies and signal rights on land. Given that the final agreement about the boarders of and ownership rights between Israel and the Palestinians hadn't been signed yet, stopping to farm land have a serious political impact. 7 The Research and development department (September, 20, 2000), A report submitted to general manager of the agricultural ministry. Table 9 - Water reduction (%) in main crops and livestock 1999-2003

Vegetables greenhouse Poultry and beef raised for meat 35 production Poultry and beef raised for eggs 0 0 0 and milk Calculated from the Water Commission report 2004 This change required adaptation to different cropping patterns, and increased use recycled and saline water. Water use for agricultural irrigation in Israel
'000 cubic meters
Calculated from the Water Commission report 2004 In 2002 the quantity of drinking water used for irrigation about half of its 1970 level and 53% of its 1990 level. In contrast, the quantity of recycled and marginal water used for irrigation increased from 100 million m3 in 1970 to 486 million m3 in 2002. The pattern of use of marginal (non-potable) water overtime is presented in Table 10. Table 10 - Use of drinking and marginal water in irrigation between 1998 and 2002
1998
Calculated from the Water Commission report 2004 Figure 6: Residual water usage
% of water 40
Calculated from the Water Commission report 2004 Employment
The structure of Israel's agriculture is currently undergoing a dramatic change. From the idealistic pioneers of the first half of last century, who built the Kibbutzim and Moshavim with the principles of self employment and self maintenance to the a more pragmatic capitalistic rules. The number of agricultural workers in Kibbutzim and Moshavim has steadily decreased over the years, substituted by unskilled hired workers (see Table 11). Table 11: Employment in Agriculture (Thousands)

1990 1995 2000 2001 2002 2003 74.3 69.6 73.2 62.9 62.5 61 43.6 28.5 25.7 20.5 19.4 18.6 30.7 22.1 47.5 62.9 43.1 42.4 % of Hired Workers of total 31.8% 64.9% 67.4% Source: Ministry of Agriculture- Annual Economic Report for 2003 (August 2004) p. 38. Figure 7: Employment
No of workers in Agri
Self-employed Farmers Calculated from Table (11) Of the 61,000 agricultural worked in only 30% (18,600) were self employed (i.e., Kibbutzniks or Moshavniks), the rest being hired workers. Shortage of water, a relatively small local market and high technological level of agricultural know-how enable the sector to change the cropping structure towards high added value crops, exported mostly to European markets. These changes dictate high managerial ability, capital intensive production technology and cheap labor. B. Principal characteristics of agro-ecological zones
Climate Classification

Map 2 classifies the land of Israel using the Köppen Climate Classification System - a
widely used system. The categorization is based on the annual and monthly averages of
temperature and precipitation. The Köppen system defines five major climatic types; each
type is designated by a capital letter.
Israel's climate varies from a dry climate (B) in Beer-Sheva, the Negev, and the Jordan valley to Moist Mid-latitude in the central and northern regions. The Dry Climates (B) is divided into two groups; BW - dry arid (desert) and BS - dry semiarid (steppe). Climates with Mild Winters (C), include Israel's coastal plane, the Northern Valleys and the Galilee, and it divided to three groups; : Cfa - humid subtropical; Cfb - marine. and Cs – Mediterranean. Subtropical Desert and Steppe BWh and BSh climate dominates the Negev region and Beer-Sheva regions respectively. Regions with BWh and BSh climate have the following common climatic characteristics: - Low relative humidity and cloud cover. - Low frequency and amount of precipitation. - High mean annual temperature. - High monthly temperatures. - High diurnal temperature ranges. Mid-Latitude Desert and Steppe BSk climate is dominate in Nizzana region, it dominated by Continental Tropical air masses during summer and Continental Polar in winter; regions with this climate have the following similar climatic characteristics: - Low relative humidity and cloud cover. - Low frequency and amount of precipitation. - Moderate to high annual temperature. - Moderate to high monthly temperatures.

Northern Galilee (Zfat)- Csb climate : Height : 937 M., Annual precipitation : 728 mm. Average annual Temp. 16.1 0C precipitation 195 172 72 35.6 15.9 20.3 22.9 24.3 25 23 23 16 Haifa (on the boarder between western Galilee and the central region) - Csb climate: Height : 300 M, Annual precipitation : 661 mm, Average annual Temp. 18.8 0C Precipitation 183 123 45 23.5 8 0 0 0 0.4 23 95 161 20.4 22.6 24.3 25 24 22 19 Tel – Aviv (center of the central region): Csa climate, Height : 3 M, Annual precipitation : 519 mm, Average annual Temp. 19.1 0C Precipitation 124 89.9 34 13.8 2.3 0 0 0 3.3 18 83 150 22.6 24.7 25 24 22 19 Jerusalem (central plain and mountain) Csa climate : Height : 785 M. Annual precipitation : 509 mm, Average annual Temp. 17.1 0C Precipitation 140 20.8 22.4 23.6 24 22 20 16 Beer-Sheva (North Negev region): BShs climate, Height : 270 M, Annual precipitation : 200 mm, Average annual Temp. 19.5 0C Precipitation 47.9 22.8 24.6 26.2 26 24 22 19 Beer-Sheva BWhs climate, Height : 5 M. Annual precipitation : 30 mm, Average annual Temp. 25 0C Precipitation 1.6 6.1 6.2 4.2 1 0 0 0 0 0.2 1.6 9.1 C. Farm structure

Table 12 : POPULATION, BY TYPE OF LOCALITY (Thousands)
GRAND TOTAL
5,612.3 5,757.9 5,900.0 6,041.4 6,209.1 6,369.3 6,508.8 6,631.1 6,748.4
Urban localities 5,101.9 5,246.6 5,383.3 5,519.2 5,675.8 5,830.0 5,964.1 6,074.7 6,186.3 Rural localities 522.2 533.3 539.2 544.7 556.4 562.1 178.7 184.5 189.8 196.4 202.6 206.5 Collective moshavim 15.9 15.9 16.2 16.6 17.2 15.8 16.7 115.5 115.7 115.3 115.5 115.6 116.2 Institutional localities 12.6 12.5 12.2 12.0 11.8 11.6 11.7 10.8 Communal localities 62.0 65.4 69.4 72.1 72.5 76.1 75.8 Other rural localities 87.5 84.8 83.0 82.6 75.5 75.5 76.7 75.7 Living outside localities 50.7 50.3 51.5 52.9 58.1 56.0 57.9 60.4 Source: Statistical Abstract of Israel 2004 No 55, table 2.12, Localities and Population, by Type of Locality and Population Group (www.cbs.gov.il). It is seen from Table 12 show that the population growth in the moshavim is higher than average growth. However, much of this growth is due to city dwellers that move to Moshvim in a pursue of improved living standards rather than as farmers. Table 13: Rural Population 1999-2203
1999 2001 2002 2003
Villages
Villages Inhabit Villages Inhabit villages – sub total Kibbutzim cooperative villages - subtotal Source: Statistical Abstracts of Israel 2000, 2004 There are three forms of agricultural settlements: the kibbutz, cooperative moshav and ordinary moshav. Roughly speaking, they used to differ based on their sharing rules. Members fo a kibbutz shared the means of production, marketing and consumptions. Members of a cooperative moshav shared the means of production and marketing but not of consumption, whereas members of an ordinary moshave share some infrastructure capital and the marketing. As was mentioned above, these institutions currently undergo major changes in a number of directions and we'll have to wait some time to see where this process is heading to. The Kibbutizm and Moshavim control the lion share of the Israeli rural areas and dominates the agricultural production even though their own social structure and objectives changed dramatically over the last 40 years. The Jewish pioneers that came to Israel at the beginning of the 20th Century came from eastern Europe (mostly Russia) and were motivated by socialist ideologies of that time. These settlers established the early kibbutzim and their successors formed most of the Moshavim. In 1950 - 1960 large immigrate waves arrived to Israel form North African and Iraq. Some of them were directed or chose to work in agricultural and founded Moshaving. Each household received a small piece of land of about 4 hectares. The purpose was mainly to provide employment for some of the new immigrants. Aside from Kibbutzim and Moshavim, private farms are rare takes place mostly between Israeli-Arab villages. D. Agro-industrial structure overview
Table 13: Output by Industry Level: 2002 and 2003
Industry (division) Revenue (NIS million) from total%
GRAND TOTAL
Mining of minerals and quarrying of stone and sand Food products - total Beverages and tobacco products - total Textiles - total Footwear, leather and leather products - total Wood and wood products (excl. furniture) - total Paper and paper products Publishing and printing Chemicals, chemical products and refined petroleum - total Plastic and rubber products Non-metallic mineral products Basic metal - total Metal products - total Machinery and equipment - total Electric motors and electric distribution apparatus - total Electronic components - total Electronic communications equipment - total Industrial equipment for control and supervision, medical and scientific equipment - total Transport equipment - total Furniture - total Jewellery, goldsmiths' and silversmiths' articles - total Manufacturing n.e.c. - total Statistical Abstract of Israel 2004 No 55, table 20.3, Establishments, Employed Persons, Employees, Revenue, Labor Cost and Wages of Employees, by Industry (www.cbs.gov.il). Food and products, which include agricultural produce and processed agricultural products, is the second largest industry. The share of the output of the food industry is 13.6%, second after chemicals 18.27%. Food and products plus the beverages and tobacco industry, which captures 3.16%, contribute 16.76% of the industry output. E. Organization of the professionals in agriculture and agro industry

Until 2005, research, training, information collection and activities that pertain to the
agricultural sector had been held by the governmental. Agbiotechnology companies and
Seed producers who are perceived as the high-tech of the agricultural activities were
excluded from the governmental support plane. The organization of the research, whose
support and training programs had been held by the ministry of agriculture, is presented
hereinafter:
Ministry of Agriculture and Rural Development
Inspection (Autonomy) Soil Conservation and Drainage Department - Main Office o Drainage Department o Mapping, Soil Research and Remote Sensing o Open Spaces Section Field Department Plant Stability Department o Soil Conservation Department o Soil Erosion Research Station o Soil Conservation & Quality Assurance Centre o Agro meteorology Department Foreign Trade Center o Deputy Director - General, Foreign Trade Agricultural Minister-Counselor in Europe Agricultural Attaches Foreign Relations Department Import-Export Services and International Trade • Export Financings • International Trade • Export Department • Import Field Rural Planning and Development Authority o Market Research o Rural Development Veterinary Services The Spokesman's Bureau Chief Scientist Minister's Bureau Assistant Director-General, Administration o human Resources o Properties, Building and Stores o Organization and Training o Information Technology Western Galilee Upper Galilee-Golan Northern Valleys Central Plain and Mountain The Agricultural Research Organization o Animal Science o Field & Garden Crops o Plant protection o Institute of Agricultural Engineering o Institute for Technology & Storage of Agricultural Products o the institute of Soil, Water and environmental sciences o Gilat - Besor Research Station o Central Experimental Station o Newe Ya'ar Research Center o Research Deputy o International Scientific Relations Director ,Settlement Law Director - General o Assistant Director-General, Economics and Production Liaison with Production and Marketing Boards Emergency Economy Department of Marketing Agriculture Products o Fisheries and Aquaculture Department Maritime Fishing division of sea agriculture Division of inner water agriculture Division of Fishing Ports and Inspection o Plant Protection and Inspection Services Quality Assurance Field Services Administrator Quality Control Quarantine Section Chemistry Section Control Section Pesticides and fodder o Produce and Subsidies Agricultural Investment Administration Deputy Director General o Economic Planning Agricultural Liaison - Erez Agricultural Liaison Office, Judaea and Samaria Extension Service
o Mechanization and Technology o plant engineering o Vegetable Crops o Farm Economics and Management Division o Citrus & Horticulture o field service laboratories The Agricultural Extension Service
The Agricultural Extension Service (SHAHAM) trains and advices growers and applies
research in conjunction with in the R&D institute of the Ministry of Agriculture and Rural
Development. Until 2005 the free provision of R&D and training was justified based on its
positive external effects. The services focused on applicable know-how to the farming
clientele in order to promote the growers over the whole range of their farm-related and
production activities. Recently, the extension services has been undergoing a shift toward
privatization. The first step will be an experiment of outsourcing three departments of
SHAHAM. Surprisingly, so far the outsourcing move has not raised fierce resistance from
farmers and the extension service employees.

F. Infrastructure – roads, electrification, communication and ports

Table 14 - Main Socio Economic indicators of the Israeli Society

Socio Economic Indicator
Percent of population
Average number of persons per household Percent PC owning households Average number of motor vehicle per household Average income per capita Percent households with holder of academic degree Average years of schooling of aged 26-50 Percent of unemployment Percent of women not in the workforce Sub minimal wage earners Source: based on the 1999 household survey, CBS. Table 15 presents data on freight volume through airports, sea ports and railways. The lion share of exports and imports is conducted via air. The volume of air-freight is constantly increasing: since 1995 a 17% and 8% increase in export and import, respectively. Export of citrus, melons and cotton wheat, seeds and oil seeds and import of frozen beef, is carried out mostly via surface freight. Between 1995 and 2002 the volume of fright shipped to and from Israel through sea transportation increased by 27% (loaded- export) and by 29% (unloaded-import). Table 15: Freight in thousands of tons
Airports Ports
Loaded Unloaded Loaded Unloaded
Source: Monthly Bulletin of Statistics 2,2005 central bureau of statistics of Israel (www.cbs.gov.il). The Israeli railway system
The share and fright volume transported via railways is declining, mainly because the railway infrastructure is still underdeveloped and an excess of supply of trucks keeps the alternative mode of transportation cheap. Until 1998, the Ports and Railway Authority was a governmental subdivision of the ministry of transportation, which used its for purposes other than developing appropriate infrastructure. This sad state of affair had changed after the railway system became an autonomous authority. Its immediate goal was to develop public transportation in order to ease the jammed traffic in Israel's big cities. Table 16 presents data on Israel's railway system. Notice, from the third row, that since 1990 there is a decline in non-major routs, included the termination of the Tel-Aviv - Jerusalem line, which has only recently been reopened (in 2005). Table (16) Israel Railway Services-length of railway lines and revenues
Length of railway line, 609 670 684 676 standard gauge in km. Length of sidings in km. Revenue at current prices in 1000 NIS Revenue at 1990 prices in 1000 NIS Revenue from freight 68.3 40.2 32.3 29.1 (%) Revenue from 23.1 49.3 60.1 59.0 passengers (%) Revenue from other 8.6 10.5 7.6 11.9 Source: Statistical Abstract of Israel 2004 No 55, table 24.4, ISRAEL RAILWAY SERVICES. The increment in line length between 2000 and to 2002 was 0.9%, lower than the population growth. The increase in railways length between 1995 and 2000 was an impressive 10%. During this period and the consecutive period the length of siding railway lines increased by 5%. The total revenues increased by 50%, mostly because of the tremendous increase in passengers' transportation. The decline in revenues from fright transportation is the direct outcome of the insufficient and poor design causing the shippers to prefer transportation via road trucking.
Table 17: Motor Vehicles and Population (end of year)
1990 1995 1997 1999 2000 2001 2002 2003 vehicle
TOTAL
1,015,404 1,459,018 1,616,828 1,729,757 1,831,530 1,914,895
1,960,023 1,982,296
803,021 1,112,281 1,228,819 1,316,765 1,396,947 1,460,851 1,496,878 1,520,571 292,038 309,987 326,428 335,778 337,517 16,240 16,476 16,752 11,303 11,849 11,897 13,836 14,806 15,163 72,413 75,643 77,472 79,736 6,631.1 6,748.4 0.211 0.260 0.274 0.294 0.296 0.294 Source: Statistical Abstract of Israel 2004 No 55, table 24.14, Motor Vehicles, by Type of Vehicle and table 2.1 The Population, by Religion and Population Group. (www.cbs.gov.il) In 2002 the total number of vehicles (private and commercial) was about 2 millions. The change in the size of the trucking fleet was bigger then in the private cars. Vehicles per capita has stabilized in 2002 (see Figure 8). Figure 8: Israel -Vehicles
qua 1000000
Source: Calculated from Table 17. Table 18 reveals that inadequate road infrastructure was the main reason for lack of growth of motor vehicles. The number of vehicles per km road is among the highest in developed nations. Table 18 - Roads, by Length and Area

LENGTH (KM.)
13,199 14,751
AREA (thousand m2.)
87,802 103,072
Population (1000) Length per capita (KM.) Area per capita (thousand m2.) Source: Statistical Abstract of Israel 2004 No 55, Table 24.13, roads (1), by length and area (www.cbs.gov.il) Figure 9: Vehicles and trucks per KM of road
Vehicles per KM of road Trucks per KM of road Source: Statistical Abstract of Israel 2004 No 55, Table 24.13, roads (1), by length and area (www.cbs.gov.il) Insufficient road infrastructure hampers the increase in the number of cars. The major bottleneck is in the urban centers. The majority of export and imports are done via the Ben-Gurion airport (fruits, vegetables and flowers) and through the seaports of Ashdod and Haifa. All three ports are connected by railway lines. Though currently the inadequate infrastructure is not a binding constrain on export, it may become so in the near future. Air freight vs. sea freight Unlike North Africa countries and Turkey, Israel must ship its merchandise via air or sea and to a larger distance. Airfreight is quicker but is more expensive. On the other hand, the longer sea shipments (3-5 days) deteriorates quality. The high price of air transport is economical only for high value crops. The cost of air transport between Israel and France is around $1200 per ton. Crops such as potatoes, onions, melons and even avocadoes whose CIF price is below $1200 can not be airfreight. The quality of potatoes, onions and avocado is not affected by the sea shipments (with avocado it can even be planned to reach the market when ripe). Sea freight melons used to suffer quality deterioration but a recent research (2002) found the right post harvest treatment that solve this problem. Table 19: Cost of sea and air transportation
Export by sea
Export by air
Conversion: 1 ton 170$ per surface Source: Interviews: The Min. of Agriculture and Rural Development, Foreign Trade Center High value crops with short shelf life, such as herbs, flowers, or tomatoes, are sent via air while others (potatoes, melons, avocados, citrus) are shipped via sea. The percentage of ownership of durable goods by Households in population
Table 20 and Figure 10 describe the evaluation in ownership of line telephone, cellular telephone, computers and wideband communication in Israel. In 1998, 94.3% of the household had at least one telephone line, 44% of the population owned a cell phone, 36.6% of the households owned a personal computer, and 8.2% had an internet connection. In 2002 there is an increase of more than 50% in the number of households that own at least one cell phone and the number of household with two or more cell phones increased from 9.9% in 1998 to 44% in 2002. The decline in rates of cellular phone use and the convenience of communication lead to decline in line phone use. 1998 1999 2000 2001
Households in population (thousands) 1,671.4 1,717.0 1,717.0 1,799.4 1,872.6 Personal computer (%) 36.6 40.7 47.1 49.8 53.8 8.2 11.9 19.8 22.5 25.4 One phone line at least (%) 94.3 94.4 94.4 91.7 90.9 One cellular phone at least (%) 44.5 52.3 63.5 73.8 78.8 Two cellular phones or more (%) 9.2 14.5 26.8 37.7 44.0 Statistical Abstract of Israel 2000-2004 No 51- 55 Figure 10: Precentage of telephone owning househods
Households in population Personal computer (%) One phone line at least (%) One cellular phone at least (%) Two cellular phones or more (%) s 1,800.0
53.8 50.0
Thousand 1,650.0
25.4 20.0
PC ownership increased from 36.6 % of households in 1998 to 53.8 % in 1992. Figure 11: ownership of personal computers by Deciles
Source for Figures 10 and 11 is Table 20. The uneven distribution of communication and the higher percent of adopters characterizes telephone ownership in Israel. Cell phone ownership in high income households is above 90%, and more than 50% of them own multiple cell phones. This suggests that Israelies are more than happy to adopt new technologies. The rate of adoption and the diffusion level of new technologies is high compared to other developed nations. Compared to the diffusion of cell phones in the USA during 2002, the Israeli rate was 50% higher. Application these findings to the agricultural sector is not straightforward. Farmers and individuals who are self employed and own an average size farm earn less than the average income. If they are 50 years or older, the adoption likelihood is below average. Younger farmers are more likely to adopted new technologies. The adoption of communication technology and IT by Israeli flower growers enabled the online marketing to Dutch flower markets. The majority of flower growers (more than 90%) use computers with broad-band connection. Education
The absolute number of pre-college and university students is steadily increasing, but as a percent of the population it fairly constant. The number of students attending agricultural secondary schools declines over time. Table 21 – number and percent from population of pre-college, college and university
students

1969/70 1979/80 1999/00 2002/03 2003/04 Kindergartens 107668 Primary Education Intermediate schools Secondary schools total Technological/vocational Post-Secondary Institutions Non University Institutions for Higher Education Universities 35374 Other Institutions Average Population-Millions Percent of higher education % of students from total population % growth in university students % growth non universities % growth of population Source: Statistical Abstract of Israel 2004 No 55, Table 8.12. Israel is an high-tech country. The blooming of high tech and biotech industries in addition to the growing size of the financial and services sectors competes with the agricultural sector that offers relatively low wages. The very fast and intensive adoption of new technologies makes Israel an interesting laboratory for new technologies for many of the international firms. This should operate to convert the traditional agricultural into a sophisticated sector, based on R&D with a focus on the development of new technologies and varieties. G. Marketing system
Figure 12: Distribution channels and marketing system for horticultural products
Fresh fruits and vegetables grower

Food chains
Wholesaler
storehouse
outside the
markets 7%
Institution
Food chains
Specialist
market 16%
retailers
Consumers
Source : Znobar (2000) http://courses.agri.huji.ac.il/71719/znobar1.pdf Production
The kibbutzim account for 80% of the production of fresh produce consumed locally (Znobar, 2000). The share of kibbutzim's income derived form agriculture has been declining and is around 22% , the remaining 78% being derived from tourism and industry. The share of moshavim's income derived form agriculture is about 20%. The production and marketing boards are entitled to build and operate storage capacity sufficient to store the excess supply and guarantee sufficient supply of vegetables and fruits. In addition to the marketing boards the retailing chains have their own storage infrastructure. The storage capacity of the three largest chains is estimated around 270 thousand tons (Znobar, 2000). Marketing
The majority of agricultural produce is distributed through packinghouses, owned by cooperative of growers or by private entities. Packinghouses classify and pack the produce and then sell it to local wholesalers or directly to the retailers (supermarket chains). If the produce is exported then the packinghouse is just another stage in the distribution channel. The classified and packed produce is then exported by one of the export companies. Three large export companies account for the majority of export: Agrexco, Medadrin-Tnuport and Arava growers. In addition to these three large exporters there are about dozen small exporters who specialize in one or two crops: Diklaim – dates, Eden – Avocado, Tropigarden – exotic fruits, Mor-Persimmon and Mango. Some 22 packinghouses specialize in citrus, while others specialize in avocado, potatoes, persimmons and mangos. Wholesalers
There are 6 wholesale markets in Israel and about 140 active wholesalers who operate in these markets - 50% in the Tel Aviv wholesale market – distributing some 720 thousand tons of agricultural produce. An average wholesaler in the Tel Aviv area distributes about 2500 tons annually, which is lower than the European average. During the last decade there has been a tendency toward consolidation. The biggest wholesaler in the Israeli market is a grower cooperative called Tnuva. Tnuve operates in the wholesaling market through subsidiaries that are on average 50% owoned by Tnuva. In addition to the traditional wholesaler markets there are about 10 delivering wholesalers who are located in rural areas (Katif, Bikorie Sade). The delivering wholesalers account for distributing 150 thousand tons. Most of the wholesalers are commissioners, i.e., they do not buy the product and share risk but sell it and charge on average 15% of the revenue. The commission in Israel is higher than the 10%-12% commission common in Europe and the U.S. (Znobar, 2000). Brokers are intermediate agents that reduce transaction costs and have some part in the negotiation between farmers, packing houses and wholesalers. Food retailers and supermarket chains
Similar to Western Europe, about 65% of purchases of food, perishables and other non-durable products is carried out in supermarkets . Due to massive consolidation of food retailing and supermarket there are now three large local chains (Supersal- 129 stores, Coop-134 stores, Coop-North 69 stores) and three big discount chains (Mega, Half-Price and Cosmos). The two largest supermarket chains own and operate logistic enters that are similar in their functioning to delivery wholesaler. They purchase directly from packinghouses and distribute the produce to their chains. Open markets
In every city there is open market that mainly sells fresh produce, processed food, meat and fish. The open markets lost their vitality as of their location which is in most cases in the center of the city. The majority of the merchandize is bought in the wholesale markets, but there are some direct sales of farmers to the open market. Specializing fruit and vegetable stores and green grocers
There are about 4000 specializing fruit and vegetable stores that account for about 50% of the fruits and vegetables. Specializing stores purchases produce from the wholesale market at a price significantly higher than the price the supermarket chains pays (larger quantity-larger discount). The price they charge is thus higher than the price in the supermarket chains (30% to 50% higher and the difference and can get up to 100% relative to the open market). Their existence is justified by their convenient location, service and better selection. Nevertheless, the number of traditional, ordinary green grocers is declining. Part 2 - Evaluation of agriculture performance

A. Trends in overall patterns yields and production of major crops
Total cultivated area in 1990 was 426,120 hectare and it declined to 325,195 hectare in
2004. Figure 13 depicts the declining cultivated areas between 1990 and 2004. Figure (13): Area used for agricultural production and
production in 1990, 1995 and 2004
The decline in produced output was not uniformly across crops. High value crops, such as vegetables and herbs, are less sensitive to the changes in the economic conditions. The total area used for vegetable production declined in 2004 relative to 1990, but the proportion of its decay is smaller than the average reduction in the cultivated land. The increasing demand for vegetables and the relative advantage of Israeli agriculture in R&D and capital intensive crops justified the continuation of vegetables production, while output of other crops declined more than proportionally to area change. Figure (14) share of each product class in terms of land used for
production and production
Figure 14 demonstrates that the share of vegetables increases over time both in terms of output and area. The share of area used for citrus growing crashed between 1990 and 2004. In 1990 citrus captured 7.5% of the cultivated land and in 2004 only 5.2%. The decline in the land used for citrus growing was 47%, and the decline in production was 67%. The citrus industry has almost vanished in Israel. From a position of being the largest horticultural crops in 1950, citrus' share fell to 34.5% in 1990 and clashed to 14.2% in 2004. The drastic decline during the 1990s was mainly due to reduction in water quotas. The steep decline in citrus production affects the entire share of the fruit production and area as citrus has been a prominent crop. Table 22 presents the changes in the area and production of major agriculture produce between 1990 and 2004. The cumulative figures indicate that the area used for agricultural production declined by 24% and output fell by 19%. The largest decline was in citrus (a reduction of 47% in land and 67% in output) and other fruits (16% in area and 48% in output). For example, in 1990 the area of Shamoti oranges was17450 hectares and fell by 55% by in 1995. The Shamoti area continued to decline and was 5200 hectares in 2002. Shamoti output reduced from 871150 Mt in 1990 to less than 279000 Mt in 2004. From 1990 to 1995, vegetables output increased by 21% while its area declined by 14%. Changes in field crops, beside cotton (where reduction in water quotas lead to a sharp decrease) are mixed. Table 22 - Changes in the area and production of major agriculture produce between
1990 and 2004
G.R. (1990-2004) Citrus Fruits
Peaches and Nectarines Total Fruits
Cereals (Rice Milled Eqv Chilies & Peppers, Green Vegetables Fresh nes Melons, watermelons et. Total Vegetables
Fiber Crops Primary Fruits and vegetables that enjoy marketing advantages, such as peaches, persimmons, sweat potatoes, melons and fresh vegetables, increased their output and cultivated areas. With regard to avocado, technological changes that made the cycling of yield smaller and increases the yield per tree, increased output even though planted area declined. Cotton growers suffered heavily from the reduction in water quotas and were the first to reduce area and production. Table 23 - Area, share of area from total cultivated land, yield in term of ton per
hectare and total production for the major produce grown in Israel
Production Area Yield 362,275 350,320 5,200 278,846 145,000 Citrus Fruits
31,940 1,896,586 1,500,650 29,235 1,291,269
906,430 16,850 1,237,393
7,495 75,717 56,750 5,800 112,069 65,000 Peaches and Nectarines 2,863 41,200 3,790 136,385 51,690 4,200 138,095 58,000 Persimmons 1,300 800 137,500 11,000 1,700 117,647 20,000 Total Fruits
73,486 4,017,303 1,919,960 72,874 3,486,827 1,390,100 61,705 3,276,271
Cereals (Rice Milled Eqv 113,760 77,300 26,624 205,800 Chilies & Peppers, Green 1,390 52,900 1,530 426,261 65,218 2,000 550,000 110,000 8,123 340,884 276,900 12,000 348,083 417,700 4,370 200 346,000 6,920 350 457,143 16,000 5,646 892,049 503,651 3,100 1,258,065 Vegetables Fresh nes 47,542 6,800 106,029 72,100 9,100 159,341 145,000 Melons, watermelons et. 14,030 245,420 162,000 20,880 407,486 439,065 19,500 352,232 385,000 Total Vegetables
161,892 7,157,379 1,824,559 156,553 7,948,233 2,192,016 139,585 8,153,588 2,199,595
Fiber Crops Primary 17,416 42,750 13,000 15,385 20,000 91,698 63,730 5,000 2,820 42,908 12,100 3,200 32,813 10,500 13,000 44,615 58,000 40,094 850 1,200 15,000 8,000 12,000 65,000 18,462 120,000 49,786 1,780 2,405 426,120 12,281,343 4,349,034 393,944 11,784,894 4,083,694 325,195 11,945,103 3,503,205
B. Agriculture output value by purpose

In 2002 the total value of the agriculture sector (direct and indirect) was 15,634 million NIS, of which the value of crops per se was 9,269 million NIS. In 2003, the agriculture sector yielded 16,041 million NIS overall and 9,662 million NIS for agricultural crops (a growth of 2.5%). Figure (15) depicts the change in agriculture output value by crops between 2002 and 2003; (+) indicates growth, (-) indicates a decline in output value. Figure (15) AGRICULTURAL OUTPUT VALUE AT CURRENT
Sheep and goats (-) Miscellaneous crops (-) MILLION NIS
Flowers & garden plants (-) Plantations, excl. citrus (-) Source: Statistical Abstract of Israel 2004 No 55, Table 19.16 The output of field crops, vegetable, cattle and poultry increased. Flower, fish and sheep production declined. 2003 was a good year for the citrus industry, due to a climate disaster in Spain. Agricultural output finds its way into one of the following four markets: - Domestic consumption. - Domestic industry. - Export. - Intermediate produce. Figure (16) AGRICULTURAL OUTPUT VALUE BY PURPOSE AT
NIS MILLIO
GRAND TOTAL CROPS - TO
For domestic consumption For domestic industry Intermediate produce Source: Statistical Abstract of Israel 2004 No 55, Table 19.16 Production in 2003 relative to 2002 was higher in three of the four outlets: domestic consumption, domestic industry and export, and was smaller in production for intermediate products. The output value is the product of multiplication of quantity and prices and since there is a negative relationship between the two it is important to compare the percent of change of the price and the quantity. The produce quantity in 2003 relative to 2002 declined by 7.2%, and the average price increased by 12.3%. In 2002 both quantities and prices increased relative to 2001. Figure (17) PERCENTAGE OF QUANTITATIVE & PRICES
CHANGE IN RELATION TO PREVIOUS YEAR
PRICE CHANGE
PRICE CHANGE
2002 2003
GRAND TOTAL CROPS - TOTAL Source: Statistical Abstract of Israel 2004 No 55, Table 19.16 Figure 18: changes in quantity and in prices by target
markets: 2002, 2003 relative to previous year
25.0 20.0 15.0 10.0 For domestic
For domestic
For export
QUANTITATIVE CHANGE 2002 PRICE CHANGE 2002 QUANTITATIVE CHANGE 2003 PRICE CHANGE 2003 Source: Statistical Abstract of Israel 2004 No 55, Table 19.16 The competition in export markets is stronger than in the domestic market, leading more elastic demand. In 2003 the value of total crop production declined by 10% relative to 2002 and the prices increased by 20%. The average elasticity of demand in the domestic market is smaller. Figure (19) Change in quantities and prices - total crops
25.0 20.0 15.0 10.0 For domestic
For domestic
For export
QUANTITATIVE CHANGE 2002 PRICE CHANGE 2002 QUANTITATIVE CHANGE 2003 PRICE CHANGE 2003 Source: Statistical Abstract of Israel 2004 No 55, Table 19.16 The change of price in the export markets was the product of two forces: (1) lower quantities and (2) devaluating of the local currency, the NIS, relative to the Euro. During 2002 the NIS was devaluated by more than 10% relative to the Euro. Since the majority of crops are exported to Europe, the devaluation improved the terms of trade for Israeli growers. The stronger demand in the local markets in 2002, caused the industry to shift a larger share of the produce to domestic consumption and pushed prices upward. In 2003, the quantities supplied to the local market went down while prices went up. Tables 24, 25 and 26 indicate that the majority of crops are marketed to the domestic market and are either targeted for consumption or to domestic industries. Flowers and field crops are exception. Only 22% of the flowers grown in Israel are sold in the local markets. The Israeli flower industry has always been export oriented. Vegetables are the largest group of agricultural products in Israel. Their production increased between 2002 and 2003. The quantity and the proportion of export of vegetables increased between 2002 and 2003. Fruits, the third group in its size, are also export oriented, due to lower local demand relative to export demand. Poultry and cattle (the second and fourth in value of production, respectively) are grown mainly for local consumption. The remaining product classes are fish, and sheep and goats production are domestic oriented. Table 24 - Agricultural Output Value, By Purpose NIS Million, At Current Prices-2002

For Intermediate GRAND TOTAL
4,871 2,960
CROPS - TOTAL
726 2,865
Vegetables, potatoes and melons Plantations, excl. citrus Flowers and garden plants Miscellaneous crops Sheep and goats Source- ISRAEL CBS , Agricultural indicators 2004.
Table 25 - Agricultural Output Value, By Purpose NIS Million, At Current Prices-2003

GRAND TOTAL
4,999 3,211
CROPS - TOTAL
Vegetables, potatoes and melons Plantations, excl. citrus Flowers and garden plants Miscellaneous crops Sheep and goats Table 26: Share of local consumption (household plus industry) 2002, 2003, and
changes in total production between 2002 and 2003.

consumption consumption GRAND TOTAL
CROPS - TOTAL
Vegetables, potatoes and melons Plantations, excl. citrus Flowers and garden plants Miscellaneous crops Sheep and goats Source for Tables 25 and 26: Statistical Abstract of Israel 2004 No 55, Table 19.16 C. Trends in major crops production

Time series of major crops production in Israel from 1990 until 2004 are presented in figures 20 and 21. Figure (20) production over time
Figure (21) production over time
The cumulative production of fruit declined over time. The decline of citrus production dragged down the production of the entire fruit industry. Orange production dropped from 871,150 tons in 1990 to 145,000 tons in 2004 -- a decline of almost 85% . Production of fruits excluding citrus actually recovered between 2002 and 2004. There is an increase in the share of fruit exported. Vegetables' production is steadily increasing faster than other product category causing its share to increase. Figure 22 depicts the production of avocados, mangoes and persimmons during the period 1990 – 2004. Production of the avocados and persimmons alternate between abundance years with 40,000 tons of avocados, and shortage years. The difference between high and low production years is about 50% (20000-22000 tons). Persimmons production reveals similar cyclical behavior. Figure (22) production of fruits
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 The cyclical production distracts the marketing efforts aimed at increasing the demand. Suppose that the marketer succeeded in establishing a demand for the fruit. In the following year the drop in the supply causes excess of demand, but since the preferences are not anchored, buyers would switch to more familiar and stable alternatives. Retailers hate unstable patterns of purchases and will not allocate space for the problematic produce, unless compensated. In 2003 finally R&D efforts by researchers in the Volcani Instituted found lead to a sharp decrease in the cyclical output pattern of Avocados. The production of vegetable is affected by overseas demand. The Israeli tomatoes became a success story after the development of the "Daniela" variety in 1970. This success was hard to repeated; new varieties, such as clustered cherries tomatoes, did not compensated for the aging of the "Daniela". The failure to find a successor to Daniela negatively affected the production and profit margins of the vegetables industry. On the other hand, the profits of the seed R&D companies "Hazera" and "Zraim Gadera" soared. There was a hope that Bell papers, particularly the Maccabi variety, and Chilies will turn out to be big winners of Israeli's vegetable export. In actual practice the competition, in particular from Morocco and Turkey, eroded the marketing edge of these products. New post-harvest technologies, and the ability to address the demand of the retailing chains retained some of the competitive advantage of chilies and bell paper (three-color). The production of potatoes and melons increased over time, but for different reasons. Potatoes became the "shining star" of the vegetable industry. Potatoes are grown in the Negev where land is abundant and its alternative price is low, and o not require much water. The Negev's desert climate enables out of season production. The new potatoes varieties are of high demand in Europe – particularly France and the UK. Most importantly, the previously uncultivated areas in the Negev allow for organic production. The combination of new varieties, modest consumption of water, technology oriented production, virgin land suitable for organic products, and favorable climatic conditions support a successful crop. In 1970 a new melon variety, called Galia, turned out to be a success story , due to long shelf life, which permits surface transportation, and sweeter taste relative to the the Honey Dew -- the competitor melon form South America. Over the years, similar and improved varieties of the Galia were successfully adapted in Spain, Morocco and other countries and the resulting competition lowered its price and eroded its marketing and taste edges. In addition, the interior color of the Galia melon is green and it is fairly small. French buyers (the preferred market for high quality crops) were reluctant to accept a melon that looks like an apple and preferred the Sharente variety. Alas, all the efforts to acclimatize the Sharente in the ARAVE failed. Figure (24) vegetable production
Ton 300,000
1990 1991 1992 19 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 20 Chillies&Peppers, Green Watermelons, Melons et.
Production of maize, cotton and wheat, is decreasing. Wheat production fell from 300,000 tons in 1990 to less than 120,000 tons. Cotton fell from 140000 tons in 1990 to just slightly above 50000 tons in 2004, and maize production declined from 100000 tons to 50000 tons in 2004. Raising water prices and shrinking water quotas are the main reason for the sharp drop in the production of these crops. Figure (25) fiels crops
Ton 150,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
D. Trade by Destination

Import and export of agriculture fresh products
The import of agricultural fresh produce is smaller than the export of fruits and vegetables. The trade surplus is partly due to regulation and custom barriers aimed at protecting domestic growers. Import licenses of fruits and vegetables are issued only if there is a natural disaster that reduces production drastically, or due to bilateral (or multilateral) agreements. Table 26: Imports o Selected Fresh Agriculture Products
Export of fresh vegetable, potatoes, persimmon, mangoes and flowers, is increasing. Export of citrus and watermelons declines and may diminish in the not-so-far future. Table 27: EXPORTS OF SELECTED PRODUCTS

Thousand tons, unless otherwise stated
Year8 Vegetables Potatoes and mangos ($million) Source: Statistical Abstract of Israel 2004 No 55, Table 19.19 8 Year of export does not necessarily comply with the year of production. Figure 26 illustrates the exports of the selected agricultural crops

Figure 26 – exports of selected agricultural crops:
Source: Statistical Abstract of Israel 2004 No 55, table 19.18
Table 28- Export from Israel of selected agriculture products by the destination
country in Europe

Total & agriculture Exports by main country of destination in Million dollars Country of destination 31,783.3 620.4 714.7 European Union - total 8,419.1 483.5 543.8 1,085.1 162.8 189.3 1,224.5 104.7 118.5 Belgium and Luxembourg Free Trade Association - Source: Statistical Abstract of Israel 2004 No 55, Table 16.6 Agricultural export is 2.2% from the total export in Israel. More than 3/4 of it goes to EU members. Figure (28) Export to the European union
Source: Statistical Abstract of Israel 2004 No 55. After the Netherlands, which receives most of Israel's flowers export, the UK is the main recipient of Israel's fruits and vegetables (36%), followed by Germany, and France (17% each). France was the largest recipient of Israel's agricultural export in the 1970s and 1980s, but marketing mistakes, growing competition with North Africa and non-conducive political environment reduced the demand for Israel's produce in France (France is still the single largest buyer of Israel's avocadoes, consuming 60% of it). Figure 29 - Share of Export to E.U. countries excluding Holland

share of E.U countries, Netherland excluded, in the
Belgium and Luxembourg Free Trade Association - Source: Statistical Abstract of Israel 2004 No 55. Table 29 - Total & agriculture Exports by main country of destination in Million dollars

Country of destination 31,783.3 620.4 714.7 Russian Federation People's Republic of China Unclassified countries Statistical Abstract of Israel 2004 No 55. The US and the Russian Federation are the two important markets after Europe. American consumers have high willingness to pay for quality, but the transportation cost is more than three times that of exporting to Europe. The decreasing European demand for Israel's produce made the U.S a favorable trading partner. The growing Russian economy is becoming an important outlet for Israel's agricultural produce. The Russian market is not yet developed enough to have the ability to pay for high quality, but it welcomes lower price produce, thus complements the EU market. E. Value added and Income of the agricultural sector
Table 30: Income, profit and salary of the agricultural sector (million NIS)
1999 2000 2001 2002
Total agriculture production 14.5 14.6 15.5 15.3 Thereof: produce Purchased Inputs Compensation for nature damage 0.37 0.4 0.4 0.5 Income after payment for hired worker Income of farmer from agriculture Income of farmer relative to the Source: http://courses.agri.huji.ac.il/71040/ Part 3 - Marketing system of fruit and vegetables
A. Organizations

Until 2004 the agricultural production and marketing have been regulated by 10 production and marketing boards: 3 boards administrated the marketing of poultry, milk and honey, and 7 administrated the marketing of fruits, vegetables, citrus, flower and ornaments, wine and grapes, peanuts and olives. The boards were established based on the perception that a situation in which many growers of undifferentiated products face a few buyers leads to unfair outcome. To be specific, most fruits and vegetables sensitive to climate changes, are non storable, and their quality can not be fully monitored. Production flexibility is limited (growers plant before demand and supply are realized). Institutional buyers have a bargaining power over suppliers, and export marketing entails economies of scale. Such circumstances lead to failure of branding (Heiman and Goldschnidt, 2004) and weaken the bargaining power of growers relative to retailers. The marketing and production boards aim is to balance out this uneven state of affairs between growers and distributors (wholesalers and retailers). Israel's antitrust law exempts some agricultural products, including vegetables, fruits, eggs, meat, honey, sheep, milk and aquaculture (fish). The exemption applies to growers, growers cooperatives and organizations, as well as to agricultural wholesalers. The Minister of Agriculture may recommend exemption of other crops to the antitrust commission. The production and marketing boards controlled long run and short run activities. It used to be illegal to plant perennial (trees) crops without a permit. A similar principle was implemented in the production of meat, fish, poultry and eggs. The production boards, and the long term planning and forecasting division of the Ministry of Agriculture determined the quantities of livestock. These quantizes were then allocated to the farmers according to known priorities (historical permits). Short term stability was achieved by controlling quantities produced via a monopolistic mechanism. Crop surpluses were destroyed to prevent price falling below certain levels – an act that, in the face of public protests, was termed "surplus clearance". The government backed up this policy to guaranteed minimum prices for most fruits and vegetables, but recently the policy has changed and no such guaranteed ere given. As a result, prices fluctuate between years of excess supply and years of shortage. In the mid 1980s, the fruits' production board decided to waive its power to set production quotas, liberalizing fruit crop production. At first, the growers' boards lost their authority to determine export quotas and latter they lost power to set production quota. Today horticultural growers' boards only certify wholesalers, while production and marketing remain centralized in the poultry, eggs and milk industries. In 2004, the Minister of Agriculture consolidated the four marketing boards of fruits, vegetables, citrus and flower into one board, called horticulture board. Production and marketing boards and other growers' associations finance their operation by charging framers about 4.5% of their revenue. This mandatory fee is is designated for R&D of new products, professional magazines, and public relation activities. The levy is based on the "packing list" -- the Israeli law prohibits selling, transporting or any other transaction that involves shipping produce from the field without an official packing list issued by a certified wholesaler. Recall that the authority to certify a wholesaler is an exclusive privilege of growers and marketing boards. Special inspection units check vehicles carrying agricultural produce to verify that they carry a valid packing list. The certification and packing lists system assure that growers pay their levies to the production and marketing boards. However, the high fees has led to illegal marketing, bypassing the certified wholesalers – for horticulture crops it is estimated that about 35% of the produce is marketed through alternative channels. Except for milk and eggs, all production boards lost their power. Large agricultural exporters are still exempted from the anti trust law. There 6 large agribusiness firms: Agrexco, Arava Growers, Mehadrin, Tnuport, Diklaim and Mor. Agrexco is a not-for-profit agribusiness giant whose owners are the government of Israel (50%) and the growers (50%). It is the largest single exporter, handling some 70% of Israel's horticulture export. Agrexco developed its own brand "Carmel", which became as strong (stronger according to Agrexco) than "Jaffa". Arava Growers is a cooperative of farmers located in the Arava Valley (that stretches between the Dead Sea and the Red Sea). Most of the melons, bell paper and cherry tomatoes are grown in the Arava. The Arava growers established their own exporting cooperative to save on Agrexcos's high transactions costs. Arava Growers handles about 5% of the Israeli horticulture export. Mehadrin is a large agribusiness firm whose income is derived mainly from real estate acquired long time ago. Using non-negligible political wit, Mehadrin succeeded to change citrus orchards, designated as agricultural land, into urban land. Mehadrin and Tnuport -- a subsidiary of Tnuva -- collaborate in exporting agricultural produce and dominate citrus export to the UK and Scandinavia. They developed their own brand "Top" and sell citrus branded as Top or as "Jaffa". Diklaim Co. is a cooperative of dates growers in the Jordan Valley and exports some 50%-60% of the Israel's dates. Mor is the largest exporter of persimmons and mangos. The perception that deregulating agricultural production and marketing by abolishing or weakening the production and marketing boards will improve the competitiveness of Israel's growers has not been proven right. The balance of power has twisted from the growers to the large retailing chains, which account to about 70% of the fresh produce sales. Large retailing chains own their own logistic centers and packinghouses (e.g., Katif packinghouse is owned by the Supersal, the largest supermarket chain in Israel). Katif signed contracts with growers, obliging them to sell to the chain but at a price that will be determined after the realization of supply and demand. This is an example of vertical integration that undermines the grower's position. The large retailing chains (or their packinghouses) purchase 95% of the fresh produce directly from growers and only 5% from wholesalers. The exporters, and in particular the large exporter employ a similar quasi consignation tactic. Based on their estimation of the production, they sign contract with European supermarket chains and importers. These contracts may specify quantities but not the price, quantities and minimum price, or quantities and price. The contract determines the marketing margin of the supermarket, slotting fees, and shared marketing activities. Exporters consignees the produce and growers are paid the difference between wholesale price and the marketing cost of the exporter. The later is a matter of constant arguments between growers and exporters. Table 31- Different patterns of distribution
Initiator
First stage
Second stage Third stage
Fourth stage
Growers cooperative wholesalers open owned packinghouses Growers cooperative wholesalers green wholesalers open wholesalers green Growers Retailers logistic centers supermarkets owned packinghouse Growers packinghouses exporter Growers packinghouses exporter wholesale market Growers packinghouses exporter Retailers growing Private owned logistic packinghouses centers Source: Cohen (1999). Most distribution and marketing channels begin at the grower level. Growers choose their product line (long term decision), and quantities (short term decision) based on the previous year's output and performances, recommendation received from the governmental consulting and training services (SHAHAM), and information from other sources (e.g., professional grower magazines). The fruits and vegetables are shipped after harvest to packinghouses, which can be owned by a private entity or by a cooperative of growers. The packinghouses sort and classify fruits and vegetables according to predetermined quality standards and the products are directed based on their quality standard to export (highest quality), domestic (medium low quality) and industry (lowest quality). There are sub-classifications of quality standards and the products are directed to different destinations according to buyers desired quality standards. The export quality standards are crucial to set prices. In Israel the minimum standard is set by the (governmental) Authority of Horticultural Protection ('Rasut Le-Haganat Hatzomech'). Quality standards of many product categories were set after lengthy negotiations between growers' organizations and the Authority for Horticultural Protection. In many cases the quality standards do not correspond to market needs but result from growers' short term interests. The Authority of Horticultural Protection, whose role is to serve as public and farmers' watchdog, sought only survival, i.e., minimizing conflicts. The inappropriate low quality standards undoubtedly contributed to the decline of Israel's agricultural export. Take for example grapefruits' quality standards and the disappearance of Israeli grapefruits from the British market. Grapefruits standards pertain to the acidity ratio (acid over sugar). The standard was set to 5.5 in the beginning of the season (October, November, December), 6 for the following 2 months (January and February) and 6.5 in March. The competitors, Florida citrus growers in this case, set a standard of 6.5-7 all year around. Market surveys showed that buyers are not satisfied with acid ratio lower than 6.5. The Authority of Horticulture Protection, nonetheless, maintained the pre-assigned low standards, yielding to pressure from growers of the northern Galilee region whose grapefruits are more sour than grapefruits grown in the central and southern regions of Israel,. This unfortunate policy led to a loss of market shares and deteriorated the once famous and successful brand name 'Jaffa'. Vertical integration of the two stages of the distribution channel leads to higher quality standards. For example, Mor is an exporter who owns a packinghouse and handles its own plantation of persimmons. Mor's persimmons are sold in higher prices relative to Agrexco's who does not own plantations and packinghouses. The quality of products and thus their marketing destination is affected by the expected prices in each of the target markets. If growers expect high quality price that is too low to justify cost needed to meet the high quality standards, they will produce in a domestic or industry standards. Some of these decision are not easily reversed. Most of the growers and packinghouses are too small to export directly their own products and use trading companies for export. Table 31 provides a list of the larger Israeli exporters of produce and their specialization. Table 32 – Largest exports of horticultural products (descending order)
Exporter Products
Full product line of crops, processed food, and flowers and breeding Medadrin-Tnuport citrus, mango, avocado vegetables, flower, herbs Persimmon and Mango. Source: Cohen (1999). Growers of export crops chose between importers, local trade companies, wholesalers, or large retailers. Traditionally produce were distribution overseas to importers and wholesalers. In the 80s, Agrexco -- the largest Israeli exporter -- began to sell directly to wholesalers, hopping it would give a competitive advantage. Selling directly to large supermarket chains caused large wholesaler to lose their interest in promoting and marketing the Israeli products. When direct sales to retailers became commonplace, removing the above-mentioned competitive advantage, it was too late to restore merchandizing relationship between exporters and wholesalers. The result is that about 70% of the Israeli fresh fruits and vegetables exported is distributed directly to large supermarket chains. A new and interesting channel of distribution is the so-called reversed channel. The final buyer, the supermarket chain, contracts a grower or a cooperative of growers specifying the variety, the quantity and the quality standard. Both sides reduce uncertainty and flexibility. Contracted growers are more vulnerable the added risk associated with losing flexibility ('Marcs and Spenser' in the UK used this method to contract growers of clustered cherry tomatoes in the Arava region). In the domestic market the combination of distribution channels is much simpler than in export, as growers and packinghouses are required by law to sell only to wholesalers. Theoretically, growers could choose between selling directly to one of the six wholesale markets and one of 140 authorized wholesalers. Practically, the choice is predetermined by size and only few large cooperatives and growers can sell directly to the wholesale markets. The majority of growers sell their produce to one of the 140 wholesalers and the choice is between Tnuva, which is the largest agribusiness firm in Israel and dominates the dairy and meat market, to one of the independent 139 remaining wholesalers. Tnuva has s a monophonic power in the domestic market. It is estimated that some 60% - 70% of the domestic produce is marketed by Tnuva. Table 33- Type and number of wholesalers in the domestic market.
Institute Number Wholesale markets Tnuva (the largest domestic wholesaler) Delivering wholesalers Specializing fruit and vegetable retailers B. Marketing margins and mark ups
There is little documented evidence on marketing gaps. The exact figures are debated by the
Ministry of Treasury (who oversees the implementation of antitrust policies via the antitrust
authority) and the Ministry of Agriculture. The first argues for large gaps as a result of
insufficient competition due to protectionist policies of the latter. The Ministry of Agriculture
claims in response that the gap is similar to that in Western Europe.
Znobar, (2000) provides information about the gap without specifying the differences between varieties. The wholesaler gap in fresh fruits and vegetables is estimated to be 30% and it is decomposed into 15% wholesaler commission, 7% depreciation, inaccurate reporting and loading, 4% unloading and palettes fees, and 4% production board levy. The retailer's margin is estimated (op. cit. p. 45) at 33%, setting the total marketing gap at 53%. Thus, if the grower receives 100 NIS per ton, the retailer buys it at 143 NIS and the consumer pays 212 NIS. Such a marketing gap is higher than that in France and Germany (35%) or the UK (44%). In a different report (Simer Consulters, 1989) the retailing margin was estimated at 35%. The vegetables marketing and growers' board in its last report before the consolidation with the fruits and the flowers boards provided detailed information on prices and marketing gaps of a number of vegetables. These calculations are provided below for the six crops. 1998 1999 2000 2001 2002 2003 Total domestic marketing Tons 163,655 179,847 181,875 159,189 Average Wholesale price 1.19 0.99 1.25 1.26 1.23 1.32 Average Retail price 2.33 1.95 2.11 2.16 2.00 2.32 Marketing margins 107% 114% 100% 110% 87% 92% Thousand Dunams 165.80 142.30 133.50 133.90 155.30 1998 1999 2000 2001 2002 2003 Total domestic marketing 70,662 74,117 76,464 76,543 89,596 86,723 Average Wholesale price 1.58 1.20 1.00 1.58 1.04 1.70 Average Retail price 3.05 2.75 2.45 3.24 2.68 3.00 Marketing margines 100% 142% 150% 106% 175% 93% Thousand Dunams 26.60 31.80 34.10 29.80 32.10 1998 1999 2000 2001 2002 2003 Total domestic marketing Tons 92,724 90,193 87,258 92,026 Average Wholesale price 1.77 1.88 1.95 2.05 2.21 1.95 Average Retail price 3.89 3.75 3.79 3.90 4.06 3.59 Marketing margines 132% 111% 104% 100% Thousand Dunams 17.60 1998 1999 2000 2001 2002 2003 Total domestic marketing Tons 150,275 148,807 151,438 157,852 Average Wholesale price 2.82 2.03 1.81 2.16 2.17 1.88 Average Retail price 4.45 3.74 3.75 4.15 4.07 3.50 Marketing margins 67% 91% 111% 97% 100% 91% 1998 1999 2000 2001 2002 2003 Total domestic marketing Tons 207,864 211,901 212,354 218,871 Average Wholesale price 1.56 1.63 1.58 1.79 1.59 1.84 Average Retail price 3.16 3.11 3.09 3.40 3.26 3.33 Marketing margins 110% 98% 100% 106% 107% 86% 89.50 106.90 112.90 114.70 127.40 1998 1999 2000 2001 2002 2003 Total domestic marketing 63,385 61,595 57,647 61,830 65,838 61,995 Average Wholesale price 3.17 2.63 3.39 2.46 2.37 2.91 Average Retail price 5.28 5.42 5.39 4.96 4.89 5.17 Marketing margins 68% 111% 63% 105% 108% 84% Thousand Dunams 20.30 22.50 21.20 22.80 25.30 The retailing margins in vegetables are higher than the 33% reported by Znobar (2000) and provide another supporting evidence to the power of retailers. C. Revenue and profit (loss) for selected vegetables and fruits

Table 34: Revenue and cost comparison, selected crops per Dunam (2004)
greenhouse greenhouse Seedling (month of seeding) Growth duration (days) Yield (Ton per dunam) 14.0 8.0 5.0 3.5 14.0 2.0 5.0 0.7 Total Revenue (NIS per dunam) 0 33,000 0 3,640 49,000 7,000 9,000 1,260 Total Expenses (NIS per dunam) Land preparation & mechanization Seeds and seedlings 1,354 2,343 1,571 Picking, classification & packaging Working capital & miscellaneous Profit before grower's labor and working capital Profit after deducting grower labor and working capital Source: Min. of Agriculture and Rural Development the Extension Service unit (Shaham),the Farm Economics and Management Division
Table 35: Avocado (Etinger) Revenue and Cost per Dunam over lifetime of a plantation

Total Production (Ton per dunam) Out of it: Export Total Revenue (NIS per dunam) Total Expenses (NIS per 666 4,379 1,461 2,094 2,742 2,994
dunam) Seeds and seedlings 0 149 149 149 181 Fertilizer and manure Weed extermination 250 520 520 520 520 520 520 520 Other materials & services Management & e.t. Working capital & 16 228 76 109 143 156 miscellaneous Profit before self labor -416 -3,859 -941 -1,574 -1,178 657 1,383 Profit after deducting self labor -666 -4,379 -1,461 -2,094 -1,698 137 863 863
Source: Min. of Agriculture and Rural Development the Extension Service unit (Shaham),the Farm Economics and Management Division D. Revenue and cost per Dunam

Table 36: Persimmon
0 1 2 3 4 5 6 -
Total Production (Ton per dunam) 0 0 0 0.4 1 2.5 3 3
0 0 0 0.24 0.6 1.5 1.8 1.8 Total Revenue (NIS per dunam) 0 1368 3420 8550 10260 10260 821 2,052 5,130 6,156 6,156
0 547.2 1368 3420 4104 4104 Total Expenses (NIS per dunam) 512.5 3708.4 1583.5 2730.3 5346.3 8827.8 9931.3 9931.3 Seeds and seedlings 0 151 162 195 218 241 287 287
Fertilizer and manure 0 29 73 97 107 107 107 107 Weed extermination 40 565 1,444 3,319 3,944 3,944 0 210 350 560 980 1,260 Other materials & services 0 300 225 525 1,650 2,775 3,150 3,150 Management & e.t. 250 520 520 520 520 520 520 520 Working capital & miscellaneous 13 193 83 142 279 460 518 518 Profit before self labor Profit include self labor -513 -3,708 -1,584 -1,362 -1,926 -278 329 Source: Min. of Agriculture and Rural Development the Extension Service unit (Shaham),the Farm Economics and Management Division E. Consumption of fruits and vegetables

Table 37 : Private consumption expenditure by purpose in NIS million at 2000 PRICES
Food, beverages and tobacco 49,485 52,090 52,839 52,948 53,383 55,093 Clothing, footwear and personal 12,387 12,188 11,767 12,693 14,076 13,351 13,436 13,984 effects Housing 46,812 52,921 55,770 57,338 59,389 60,769 Electricity and fuel - home 5,092 5,401 5,772 5,800 6,411 6,728 7,173 consumption Furniture, furnishings and 13,273 13,907 14,481 16,788 18,607 17,449 16,684 17,090 household equipment Household maintenance 7,808 8,738 9,085 9,482 Personal care and health 11,378 11,980 12,673 13,656 15,069 16,409 Transport and communications 30,434 31,715 32,431 34,353 36,792 40,578 Recreation and entertainment 21,898 22,547 24,234 25,049 26,397 27,108 Other goods and services 16,443 17,248 17,798 18,235 18,839 19,790 Source Statistical Abstract of Israel 2004 No 55, Table 14.9,
F. Calorie consumption balance 2003
Average per capita calories consumption is 3545 kilocalorie. Average annual per capita
supply of food groups is 121 kg of bread and cereals, 245 kg vegetables, 47 kg potatoes and
stretches, 71 kg meat and fish, 32 kg sugar and sweets, 236 eggs and 177 liters of milk The
calorie supply per capita per day in 2002 was 3714. The supply of food per capita is the
product of 107 grams of protein, 484 carbohydrates and 144 gram fat. The proportion of fat
from total calorie supply was 20% (697 kcl) and it below the threshold recommendation of
30%.
Table 38: Annual supply per capita of food
Kg per capita per year Bread and cereals, Potatoes and stretches Sugar and sweets Beans, legume, Peanut, nut Fruits and fruit juices Alcoholic beverages Source : Press release no 2004 274 - The central bureau of statistics 14/10/04 Ms. Shafir G. Dependence in imports factor

Import Dependency Ratio IDR =
Export − ( production + import ) *100 Higher IDR implies higher import dependency.
Table 38A- L IDR
Bread and cereals Sugar and sweets Beans, peanuts, and 61.7 nuts Oil and fat Fruits, vegetables and potatoes Meat Source: Press release no 2004 274 - the central bureau of statistics 14/10/04 Ms. Shafir 99.5% of cereals consumption comes from import, i.e., Israel supplies only 0.5% of its own consumption. Israel also dependents heavily on imports of sugar and sweets, as only 5% are produce locally. In addition, 61.7% of the beans, 40.3% of the fats and oils, and 78.8% of the fish are imported. Some 74% of the consumption of fruits, vegetables and potatoes is produced domestically; 77.2% of the meat and 98.9% of dairy products are produced domestically. H. International comparison
The daily value of calorie consumption in Israel is similar to industrial countries but
somewhat higher than other Mediterranean countries. Consumption of vegetable
calories is similar to other Mediterranean countries.

Selected
% of calorie that come from Daily
countries
vegetable consumption
Supply of Kcal
Israel 81
3714
Source: Press release no 2004 274 - the central bureau of statistics 14/10/04 Ms. Shafir Part 4 - Evaluation of Agri Industrial performance

Table 40 - Top 30 import of agriculture products to Israel at 2002 and 1990

1990 2002
% from % from
% from % from
Val (1000$)
Val (1000$)
Total Top 30
Total Top 30
110,624 9.2% 15.0% 191,357 10.1% 13.3% 73.0% Food Prepared
31,470 2.6% 4.3% 164,322 8.6% 11.4% 422.2% Soybeans
102,532 8.6% 13.9% 156,256 8.2% 10.8% 52.4% Beef and Veal, Boneless
Cigarettes
39,406 3.3% 5.4% 108,126 5.7% 7.5% 174.4% Sugar Refined
17.6% 101,892 5.4% 7.1% -21.5% 49,611 4.1% 6.7% 101,795 5.3% 7.1% 105.2% 39,966 3.3% 5.4% 46,616 2.4% 3.2% 16.6% Crude Organic Materls 29
34,160 2.9% 4.6% 41,111 2.2% 2.8% 20.3% Chocolate Products nes
12,769 1.1% 1.7% 38,818 2.0% 2.7% 204.0% Sugar Confectionery
15,773 1.3% 2.1% 34,008 1.8% 2.4% 115.6% Milled Paddy Rice
20,392 1.7% 2.8% 30,543 1.6% 2.1% 49.8% Fruit Prepared nes
1.3% 30,287 1.6% 2.1% 222.4% Flour of Maize
12,135 1.0% 1.6% 23,413 1.2% 1.6% 92.9% 0.5% 22,584 1.2% 1.6% 578.0% Breakfast Cereals
0.7% 20,790 1.1% 1.4% 314.8% Food Wastes Prep Feed
0.9% 18,848 1.0% 1.3% 179.6% Sesame Seed
21,736 1.8% 3.0% 18,444 1.0% 1.3% -15.1% Coffee Extracts
0.6% 17,662 0.9% 1.2% 285.6% Coffee, Green
28,476 2.4% 3.9% 17,521 0.9% 1.2% -38.5% 0.5% 17,380 0.9% 1.2% 407.7% Beer of Barley
0.3% 16,955 0.9% 1.2% 616.6% Beverages Dist Alcoholic
0.7% 15,185 0.8% 1.1% 177.4% Sugar (Centrifugal, Raw)
1.2% 14,836 0.8% 1.0% 72.4% Orange juice Concentrated
11,631 1.0% 1.6% 14,400 0.8% 1.0% 23.8% Tobacco Leaves
23,145 1.9% 3.1% 13,608 0.7% 0.9% -41.2% Macaroni
0.3% 12,537 0.7% 0.9% 579.5% Beverages Non-Alcoholic
0.1% 12,502 0.7% 0.9% 0.6% 0.8% 3459.1% Total Top 30
61.5% 100.0%
1,443,741 75.9% 100.0%
1,903,201 100.0%
The major agriculture product imported to Israel is wheat, which is imported mainly from the U.S. The import of wheat increased by 73% between 1990 and 2002. Prepared food is the second largest import item, followed by Soybeans and Beef. Beef is imported mainly from Argentina and sporadically from the U.S. A. Import and export of fresh and processed food
The volume – both quantity and value – of processed food import has been growing over
time, while export of agriculture processed products has been declining. The ratio of import
relative to export is over 50 by quantity and over 7 by value. The large difference between the quantity import-to-export ratio and value import-to-export ratio is a result of the high value of exported food products relative to low value imports. This favorable outcome is a result of the specialization and advanced know-how of Israel's agricultural sector. In 1990, the import-to-export ratio was 3.3 and in 12 years this ratio, which reflect the deficit in the balance of trade, has doubled. The agricultural trade deficit increased since the value of import has doubled and the value of export fell by 37%. Table 41 - Imports and Export: Total without Beverages + Tobacco + Coffee + Tea +
Cocoa
1990 1995 2000 2002
Imports - Qty (Ton) 2,364,868 3,581,797 4,045,665 4,146,510
Imports - Val (1000$) 724,402 1,128,936 1,024,852 1,020,772
Exports - Qty (Ton) 163,369 190,212
Exports - Val (1000$) 216,766 241,841 167,771
Figure 30 depicts the changes in import and export measured by quantity and value. The decline in export is larger then import growth. Figure 30: Import and export of food - total without
1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 Imports - Qty (Ton) Imports - Val (1000$) Exports - Qty (Ton) Exports - Val (1000$) The deficit in the balance of trade in beverages and tobacco is larger than the deficit of the entire food category. In 1990, Israel imported about $73 million worth of beverage and tobacco and exported about $20.5 millions, yielding a deficit of $52.5. The 1990 import over export ratio was of 3.6. Between 2002 and 1990 the value of import increased by 160% while the value of export decreased by 48%, resulting in import-export ratio of 17.6. The import export ratio in the coffee, tea and cocoa category, which was 4.7 in 1990, increased to 10.3 in 2002. Table 41 - Foreign trade in the Beverages, Tobacco, and Coffee, Tea and Cocoa
categories for years 1990, 1995, 2000 and 2002

Year 1990
Beverages +Tobacco
Imports - Val (1000$) 73,250 110,863 159,730 190,858
Exports - Val (1000$) 20,548 38,644 13,505 10,842
Coffee + Tea + Cocoa
Imports - Val (1000$) 73,209 164,618 121,629 118,911
Exports - Val (1000$) 15,567 58,166 26,958 11,540
Figure 31: Foreign trade of Beverages, Tobacco,
Coffee, Tea and Cocoa
Beverages+Tobacco - Imports - Val (1000$) Beverages+Tobacco -Exports - Val (1000$) Coffee+Tea+Cocoa - Imports - Val (1000$)Coffee+Tea+Cocoa - Exports - Val (1000$) 1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source: FAO
Table 42 - Foreign trade in Processed Vegetables for years 1990, 1995, 2000 and 2002

Dehydrated Vegetables
Imports - Qty (Ton)
1,280 1,900 2,554 2,358 Imports - Val (1000$)
4,799 6,733 5,358 5,442 Exports - Qty (Ton)
3,800 5,700 6,195 6,750 Exports - Val (1000$)
9,242 14,552 15,759 15,784 Frozen Vegetables
Imports - Qty (Ton)
2,000 5,600 4,116 5,945 Imports - Val (1000$)
1,726 4,817 4,024 5,402 Exports - Qty (Ton)
3,400 4,000 7,550 6,456 Exports - Val (1000$)
4,642 4,325 7,061 6,228 Figure 31-A: Foreign trade in Processed Vegetables for years 1990, 1995, 2000 and 2002 Frozen Vegetables Imports - Qty (Ton) Imports - Val (1000$) Exports - Qty (Ton) Exports - Val (1000$) The balance of trade in processed vegetables is positive. In 2002 import export ratio was 0.35 in dehydrated vegetables and 0.95 in frozen vegetables. Figure 32: Import and export of canned and frozen
fruits. Canned and Frozen Fruit
Imports - Qty (Ton) Imports - Val (1000$) Exports - Qty (Ton) Exports - Val (1000$) There is a large decline in the export of frozen and canned fruits. The import of canned and frozen fruits is almost steady, and therefore, the deficit in the balance of foreign trade in that category increases. B. Export and Import of Beef and Poultry including shell eggs
The lion share of the beef consumed in Israel is imported. Neto Holding company and Tnuva
are the min importers. There is not export of beef. The poultry industry supplies the entire
demand and excess production is exported mainly to Russian Federation countries.
C. Export and Import of dairy products
The dairy industry is highly advanced and a world leader in the production of low fat soft
cheese. But even in this industry, Israel's trade balance is not flattering. In 2003, the value of
imported cheese to Israel was $6.4 million while the export was $2.2 million. This is
somewhat disturbing since Tnuva opened a branch in New York, targeting the large kosher
market in the U.S. Tara and Strauss operate in the Jewish communities in Western Europe.
It is expected that liberalization in the dairy industry will increase exports of Israel's dairy
products to these markets.
D. Supply of fresh vegetables and fruit to factories, by use of the processed
produce:
The decreasing supply of fresh vegetables and fruits to industrial processing (juice,
comfitures, jam, canned, frozen and dehydrated is depicted in figures 33 and 34.
Figure 33
Figure (33) Domestic & Export of fresh
agriculture crops to factories
d o mest ic
d o mest ic
d o mest ic
d o mest ic
1995 2000 2002 2003
VEGETABLES - TOTAL FRUIT, EXCL. CITRUS & Olives - TOTAL Sources: Statistical Abstract of Israel 2004, 2002, 2000, 1995 Figure 34
Figure (34) SUPPLY OF FRESH AGRICULTURE CROPS TO
FACTORIES, BY USE OF THE PROCESSED PRODUCE
1,090,200
For local consumption Sources: Statistical Abstract of Israel 2004, 2002, 2000, 1995

Figure 35
Figure (34) SUPPLY OF FRESH VEGETABLES AND FRUIT TO
VEGETABLES - TOTAL CITRUS - TOTAL FRUIT, EXCL. CITRUS Sources: Statistical Abstract of Israel 2004, 2002, 2000, 1995 E. Analysis
Until 2000, Israel's GDP per capita grew faster than other OECD countries. During 2001,
2002 and 2003, growth falters due to lower demand worldwide and domestic instability. The
economy has recovered nicely during 2004 and 2005 looks promising so far. A consequence
of the recession years (2001-2003) is the reduction in food demand. Weaker food industries
did not succeed to survived while strong industries recovered and even increased
production. Table 43 presents indicators for production and employment, with 1994 is the
base year that assumes the value of 100. Total food production increased to 133.4 in 2000
(+33.4%) and has stabilized at 124 in 2003. Processing of fruits, vegetables, fish, meat and
poultry, and chocolate and confectionery categories suffered from the recession and their
production in 2003 is lower than in 1994. Industries that were negatively affected but their
output is higher relative to 2000 are: edible oils, margarine and oil products, and prepared
food products. Industries that increased production are: beverages and tobacco products,
grain mill products, bakeries, matzos and pastry products. The dairy products and icecream categories production remain constant over the years. Table 43: MANUFACTURING PRODUCTION AND EMPLOYEES, BY INDUSTRY
(AGGREGATED GROUP) (Indices). Base: 1994 = 100
Manufacturing production
1995 1996 1997 1998 1999 2000 GRAND TOTAL
108.4 114.2 116.2 119.5 121.2 133.4 126.2 124.4 124.0
Food products – total 107.1 108.5 110.3 110.4 113.2 113.5 111.6 109.6 106.3
Processing of meat and poultry 111.2 104.4 101.8 105.0 116.0 113.8 102.4 103.1 94.5 Processing of fruit, vegetables and fish 104.4 106.4 104.1 107.6 102.9 100.7 92.3 88.5 93.6 Edible oils, margarine and oil products 117.7 107.9 106.6 117.4 114.4 113.0 115.0 111.2 Dairy products and ice-cream 103.5 103.4 107.5 111.2 110.4 110.7 112.6 110.0 109.9 Grain mill products 103.2 101.5 103.1 107.3 109.5 109.3 110.3 113.6 116.7 Bakeries, matzos and pastry products 104.8 109.2 107.5 102.5 98.8 101.9 96.3 100.1 101.8 Chocolate and confectionery 125.3 132.7 122.8 116.3 119.0 113.2 113.2 90.9 86.1 Prepared food products 98.9 122.5 125.0 125.5 133.6 154.6 156.5 134.4 114.5 Food products n.e.c. 103.2 114.2 127.5 124.7 133.9 128.6 138.2 145.1 135.8 Total - Beverages and tobacco products 119.6 112.3 123.9 129.5 123.8 123.2 125.3 126.1 127.8
144.2 154.5 152.2 157.4 152.2 149.0 Employees
1996 1997 1998 1999 2000 2001 2002 2003 GRAND TOTAL
105.3 104.3 103.3 101.9 103.2 100.3 96.3 93.9
Food products - total 105.5 105.4 102.3 101.8 101.4 98.6 99.3 98.6 Processing of meat and poultry 104.7 97.6 102.3 104.5 102.4 98.3 95.4 92.0 Processing of fruit, vegetables and fish 68.6 62.3 56.8 52.5 53.4 Edible oils, margarine and oil products 98.3 91.7 89.3 89.5 98.0 87.2 Dairy products and ice-cream 127.6 143.5 148.1 147.6 138.2 143.8150.1154.0 Grain mill products 96.9 94.5 90.2 100.4 113.9 115.9119.5123.6 Bakeries, matzos and pastry products 104.4 103.6 98.8 95.7 96.4 88.8 92.3 91.7 Chocolate and confectionery 101.9 99.2 86.5 83.2 78.0 83.8 82.1 82.5 Prepared food products 122.2 120.5 122.6 127.7 153.5 153.4141.9139.4 Food products n.e.c. 117.8 142.0 142.0 141.3 138.1 141.9143.0143.7 Total - Beverages and tobacco products 103.6 103.8 102.8 105.4 108.5 106.8104.6103.3 100.3 103.0 103.9 101.2101.5100.4 Sources: Statistical Abstract of Israel 1995-2004 No46- 55 The number of employees in the food industry declined between 1994 and 2004 by about 6%. The sharpest decline was in the processed fruits, vegetables and fish (-46%) followed by chocolate and confectionery and then edible oils, margarine and oil products (-17.5% and -12.8% respectively). The industries that increased the size of their workforce are dairy products and ice-cream +54%, prepared food products 43.7% and Grain mill products 23.6%. The top three industries that increased their workforce are not necessarily the same industries with the highest growth in production. The dairy and ice cream industry added more that 54% employees but kept its production constant. Table 44 – food manufacturing and Processing Establishments
1995 1997 1998 1999 2000 2001 9913 9,810 9364 8,869 8,576 8,096 1018 1,094 997 988 1,008 976 Beverages and tobacco prod. Sources: Statistical Abstract of Israel 1995-2004 No 46- 55 The indicators for production show a stability between 1994 and 2004 and a decline between 2000 and 2004. The employment indicators show a decline in employment and the number of food producers agrees with these figures and decline from 1019 in 1995 to 976 in 2001. There is a small increase in the number of beverage producers from 51 in 1997 to 58 in 2001. F. Special Section -Focus on Tnuva the largest dairy producer
Tnuva is the largest Israeli milk and dairy products food processor and one of the leading
Israeli firms. Tnuva was established as a cooperative of 620 kibbutzim and moshavim. It
buys and processes about 70% of the milk produces in Israel. Tnuva guaranteed buying the
milk produced by its members at a predetermined price (termed target price). The target
price (a matter of fierce policy debate and will be discussed below ) is practically a version of
cost plus pricing. In order to assure Tnuva's ability to pay the target price, the government
determined the production quotas and guaranteed to cover any deficit. Tnuva produces
almost the entire spectrum of dairy product (fresh milk, milk powder, butter, cheese, yogurts).
Since it is not a public company, performance data are hard to obtain and or derived mainly
from secondary sources.
Its annual net profits increased in 2004 to 210 million NIS ($ 47.7 million) after four years of stagnation (1999 – 154 million NIS, 2000 – 150 million 2001- 120 million, 2002 – 130 million, and 2003 - 150 million NIS). One of the reasons for Tnuva's improved performance is its successful multi-cooperation with Yoplait, a French yogurt producer. The multinational alliances and their affect on the agro-industrial sector are to be discussed in details in part V. 60% of Tnuva's revenues come from milk and milk products. Tnuva's value has been estimated in April, 2005 at 4-4.5 billion NIS ( about $ 1 billion). Part 5 - The Food retailing system in Israel
The turnover of food retailing was 37 billion NIS in 2004. The annual growth of food retailing is 2%-2.5% --the same as the population growth rate. The Israeli retailing system is highly competitive with overcapacity of facilities and storage area. In 2002, about 3500 food retailing companies were active; of which some 13%-15% are owned by the three large supermarket chains: Supesal, Coop (Ribua Kahol) and Club Market (the latter has recently filed for bankruptcy procedures). The three large chains accounted for about 47% of the sales of food and grocery items (Globs, 2002). Specializing chains positioned themselves to serve a particular segment form the second level of the retailing pyramid. In the Israeli business jargon they are termed private retailing chains. In 1992, the largest three private chains were Habib, Half- Price, and Tiv Taam. The first two are discount retailers who operated in the peripheries and suburban areas and target low income consumers. Tiv-Taam had chosen a different positioning, targeting Russian immigrants -- a market segment of more than a million consumers, characteristics by low-medium income and preferences for non kosher food. The three private chains accounted for 4% of the food sales. The other 47% of food sales were divided among the remaining 3000 old fashion groceries. During 2002-2005, the tendency of differentiation and segmentation has intensified. The discount chains had bloomed, hurting the sales and profits of the large three giants. Tiv-Taam changed its positioning and upscaled itself to the medium-high income consumers who seek culinary excitements, which could be found more easily in the non kosher food chain that offer a larger variety than the large chains who binded themselves to kosher customers. The reasons for the growth in the market share of the discount retailers resulted from the 2001-2003 recession and the wrong marketing strategy of the large retailers. In 2004, the market share of the largest two supermarket chains, Supersul and Coop, was 26.6% and 25.5%, respectively, Club market's market share was 13.8% (it continued to decline in 2005 to 13.4%). The market share of discount chains and the specializing retailers rose to 14% - 18%. The private groceries, suffered from the development of the market. The growing power of the large retailing chains and the rising attractiveness of the specialized and segmented chains have changes the rules of the game. Squeezed by the large chains from above and by discounters from below, groceries were expected to adopt the survival strategy that has been adopted by groceries in the U.S. and Western Europe -- switch to delicatessen, strengthened the personal service dimension, and focused on special needs, i.e., niche strategy. Failure to adopt these strategies resulted in further reduction of market share. Food groceries market shares declined in 2004 to 14.8%. Groceries lost 66% of their market shares over a period of 2 years! The 2001-2003 economic recession reduced food demand and consumers, seeking to save income, were willing to increase transaction costs and change buying habits, e.g. buying low price substitutes and shopping at suburbs in discount shops. The large chains reacted too slow. The large chains lowered prices, changed their store portfolio and replaced local neighborhood branches into semi-discount stores. The changes in preferences of buyers enabled the rapid expansion of the discount retailing chains. This expansion increases their bargaining power, reduced the price they are paying to their suppliers and enabled the discounters to further reduce their price. The increased attractiveness of the discount chains over the senior food retailers may be partly irreversible, as buyers may change their buying habits for a long time. A threat from a different direction came from the strategy of Tiv Taam and its followers. Tiv Taam changed its positioning into high quality, offering products that are out of reach in the senior food retailer due to their self imposed kosher foods restrictions (about 40% of Israel's population define themselves as seculars). Part 6 - Agricultural and agro industrial policies
A. Brief history of major policy developments
Main strategic developments occurred in the last two decades:
1. The socio-economic and demographics structure of the Israeli farm has changed. From full-time, self employed farmers to part-time farmers who rely on hired work. 2. The share of income from agriculture and agro-industry declined and a larger portion of the household income comes from services and work outside the farm. 3. Farmers (particularly old farmers) whose children chose no to continue farming sold or lease their farms (with the production quotas, water permits etc.) to those that continue farming. Active farms became larger and enjoy economies of scale. 4. Supply constraints became more binding as the alternative cost of land and water soared. The large immigration waves and the growing population raised the price in the urban areas. Water became scarcer and its price for agricultural usage increased. Water usage has been administrated by setting quotas. These restrictions caused growers to abandon land and leave it uncultivated. 5. Growing competition from other Mediterranean countries, African countries and South American, changes in taste of consumers. 6. Technology changes enabled the production of higher yields using a smaller 7. Like other developed nations, Israel's economy has become bi-polar economy with hi-tech and service industries at the one end the low-tech and manufacturing industries at the other end. The large wave of Russian immigrants increased Israel's human capital, as many of them where highly educated and skilled. (Alas, the proportion of young individuals who choose to learn technology and mathematical skills decline and that places a threat for the high tech industry in Israel.) Educated individuals seek employments in high pay sectors, which do not include agriculture. 8. The days where Israeli farmers (kibbutznikim and moshavnikim) enjoyed a prestigious image are long gone. 9. The government, in an effort to help the financially troubled kibbutzim and moshavim , has been changing the land property rights, enabling using changing some land from agricultural to urban. 10. Israel is a member of the WTO, which limits its regulation tools. 11. The retailing system in Israel became very concentrated and the bargaining power of the logistic centers operated by the three big retailing chains grew enormously, while the growers did not succeeded in building a countervailing power. These changes and forces call for a major strategic change. The agricultural sector should have focused either in strategy aimed at developing a technology that will enable production in lower cost than the competition or differentiating the produce, or alternatively adopt a strategy of producing only high value corps where the high education and the technological sophistication would be an advantage. The changes that the agricultural sector is experiencing are: 1. The Israeli agriculture changed its strategy from mass production into specializing high technology oriented marketing. 2. Increasing imports of low value foods and increasing exports of high value foods. 3. Increase in the power of high tech R&D firms: seed, breeding genetics, agbiotech 4. Decline of traditional industries: citrus, cotton wheat. B. Economic situation and its effects on the agricultural and food sectors
The average monthly salary (before tax) was 7550 NIS and 7400 NS in 2004 and 2005,
respectively. The decline is partly due to overall economic conditions and partly due to
reduction in government transfer payments and subsidies. The average agricultural monthly
salary was 4542 NIS.
The average cost of living, calculated as the basic expenditures for food, housing, health insurances, education and cultural activities, was 7500 NIS for a family of four. With both parents working in agriculture the combined income still falls below the average cost of living. C. Governmental Support
The Israeli Government involvement in the agricultural sector activities has been criticized to
be far above the share of the agricultural sector in the economy. The agricultural political
lobby succeeded to guarantee a some support, agricultural subsidies in Israel are way below
their counterparts in the EU and North America.
Governmental support is classified into direct support, which is the complete set of regulation that apply to the agricultural sector and the budget that reflects the share of importance attributed to the sector, and to indirect support, which applies to laws and regulation exempting farmers from restrictions imposed on other sectors. Direct governmental support during 2004 includes the following items. 66 million NIS were directed to subsidizing investment, such as dairy burns designed to meet new environmental regulations, and replacing irrigation facility to efficient, water saving systems. 258 million NIS used to subsidize irrigation water and compensate farmers for water use restrictions. 247 million NIS were spent on training and inspection services (SHAHAM, agro technical inspection); 166 million NIS to government R&D, the majority of which is directed towards development of new varieties and new pesticides. A budget of 52 million NIS was allocated to the damage and disaster insurance fund, which is a semi governmental insurance company insuring (in subsidized rates) growers from natural disasters. 75 million NIS spent on minimal salary and income guarantees for local market farmers and in particular small chicken growers in the Galilee (the Galilee law). 11 million NIS were allocated to export subsidies. The support for the agricultural export has been reduced dramatically since 1995 mainly due to GATT and WTO restrictions. Indirect Support: The indirect support is realized in five domains: exemption from antitrust law, exemption from collecting (and paying) VAT, import barriers (custom, regulations), subsidizing the cost of land leases, issuing import licensees. The marketing and growers boards were exempted from the antitrust law, i.e., cartelization of growers and marketers was allowed only to the agricultural sector. In 2005, a new law abolished the historic exemption, except for dairy and poultry production and imports, which are still negotiated. D. International trade policies
On November 1995 in Brussels, an agreement between the European Communities
and their Member States and the Israel was signed (hereinafter referred to as "the Euro-
Mediterranean Agreement") and entered into force on 1 June 2000. The Euro-Mediterranean
Agreement was validated in January 2005, and applies to all member, including the new
ones (the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland,
Slovenia and Slovakia
In Article 6 and 8 of the basic agreement from 1995, a free trade area between the EU community and Israel shall be reinforced according to the modalities set out in Euro-Mediterranean Agreement and in conformity with the provisions of the GATT and the WTO. Customs duties on imports and exports, and any charges having equivalent effect, shall be prohibited between the Community and Israel. This does not include all agriculture products, Article 11 of the agreement specifies that the Community and Israel shall progressively establish a greater liberalization of their trade in agricultural products of interest to both Parties and Article 14 indicates that the Community and Israel shall examine in the Association Council, product by product and on an orderly and reciprocal basis, with the possibility of granting each other further concessions. Protocol No.1 contains arrangements of importation into the Community of agricultural products originating in Israel and Protocol No. 2 the importation of agricultural products into Israel originating in the Community. E. Main aspects of protocol No.1
- The products listed in the Annex, originating in Israel shall be admitted for importation into the Community, according to the conditions contained hereafter and in the Annex. - Customs duties are eliminated or reduced as indicated in column "a".
- For certain products, customs duties are eliminated within the limit of the tariff quotas
listed in column "b" for each of them. These tariff quotas shall apply on an annual basis
from 1 January to 31 December, unless otherwise specified.
- For the quantities imported in excess of the quotas, the common customs duties are, according to the product concerned, applied in full or reduced, as indicated in
column "c".
- For certain products, the exemption of customs duties is granted in the framework of reference quantities as indicated in column "d".
- For all the products listed in the Annex, the tariff quota and references quantity volumes are increased from 1 January 2004 to 1 January 2007, in four equal installments, each corresponding to 3% of these volumes. - Selected produce applying to protocol 1: quota (t, customs duty quantity indicated) possible tariff indicated) Cut flowers and flower buds, New potatoes, from 1 January to March 31, fresh or chilled Tomatoes, fresh or chilled tomatoes 4
+ 1 000 for
Sweet peppers, fresh or chilled Avocados, fresh or dried Grape juice, including grape F. Main aspects of protocol No.2
- The products listed the Annex originating in the Community shall be admitted for importation into Israel according to the conditions contained herein and in the Annex. - Import duties on imports are either eliminated or reduced to the level indicated in column "a", within the limit of the annual tariff quota listed in column "b", and subject to
the specific provisions indicated in column "e".
- For the quantities imported in excess of the tariff quotas, the customs duties are, according to the product concerned, applied in full or reduced as indicated in
column "c".
- For all the products listed in the Annex, the tariff quota and references quantity volumes are increased from 1 January 2004 to 1 January 2007, in four equal instalments, each corresponding to 3% of these volumes. Selected produce applying to protocol 2: Description (1)
quota customs duty quantity (t) provisions otherwise current or indicated) possible tariff Milk and cream in powder, granules or other solid form, of a fat content, by weight, not Butter and other fats and oils derived from milk; diary spreads Garlic, fresh or chilled Peas, Pisum sativum, dried and shelled, for sowing Other wheat and meslin References
Znobar Ltd, "Metropolitan wholesale market in Tel-Aviv- Program and Feasibility Study, Stage A", 2000. Table 1 Source: Statistical Abstract of Israel 2000, 2004 Statistical Abstract of Israel 2000 No 53, Statistical Abstract of Israel 2004 No 55 Table 2 Source: From the FAO (FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS) Statistical Databases website , http://faostat.fao.org Table 3 Source: Rural Planning Authority, Min. of Agriculture and Rural Development, 2003 Table 4 Agriculture in Israel (the Industry Account, Area and livestock, Price Index of Output and Input) 2001-2003, central bureau of statistics of Israel September 2004, Table 1. Figure 1 Agriculture in Israel (the Industry Account, Area and livestock, Price Index of Output and Input) 2001-2003, central bureau of statistics of Israel September 2004, Table 1. Figure 2 Agriculture in Israel (the Industry Account, Area and livestock, Price Index of Output and Input) 2001-2003, central bureau of statistics of Israel September 2004, Table 1. Table 5 Water usages 1986-2003 and forecast for the year 2005 http://courses.agri.huji.ac.il/71721/kislev-atlas2.pdf Heiman, Amir, "The Use of Advertising to Encourage Water Conservation – Theory and Empirical Evidence," Journal of Contemporary Water Research and Education (formerly known as Water Resources Update) 121, January 2002, 79-86 . Table 6 Water per capita consumption and per capita consumption by usage sector. http://courses.agri.huji.ac.il/71721/kislev-atlas2.pdf Figure 3 http://courses.agri.huji.ac.il/71721/kislev-atlas2.pdf Calculated from the Water Commission report 2004, The Research and development department (September, 20, 2000), A report submitted to general manager of the agricultural ministry. Table 9 Water reduction (%) in main crops and livestock 1999-2003 Calculated from the Water Commission report 2004, The Research and development department (September, 20, 2000), A report submitted to general manager of the agricultural ministry. Table 10 Use of drinking and marginal water in irrigation between 1998 and 2002 Calculated from the Water Commission report 2004, The Research and development department (September, 20, 2000), A report submitted to general manager of the agricultural ministry. Figure 5 Calculated from the Water Commission report 2004, The Research and development department (September, 20, 2000), A report submitted to general manager of the agricultural ministry. Figure 6 Calculated from the Water Commission report 2004, The Research and development department (September, 20, 2000), A report submitted to general manager of the agricultural ministry. Figure 7 Calculated from Table (11) Source: Ministry of Agriculture- Annual Economic Report for 2003 (August 2004) p 38 Map 1 From the Ministry of Agriculture and Rural Development website, "ISRAEL AGRICULTURE, facts and figures" by Dr. Arieh Sheskin and Dr. Arie Regev, www.moag.gov.il Map 2 The Köppen Climate Classification System, http://info.smkb.ac.il/home/home.exe/5664/5673 All weather tables. http://info.smkb.ac.il/home/home.exe/5664/5672 Table 12 POPULATION, BY TYPE OF LOCALITY (Thousands) Statistical Abstract of Israel 2004 No 55, table 2.12, Localities and Population, by Type of Locality and Population Group (www.cbs.gov.il). Table 13 Output by Industry Level: 2002 and 2003 Statistical Abstract of Israel 2004 No 55, table 20.3, Establishments, Employed Persons, Employees, Revenue, Labour Cost and Wages of Employees, by Industry (www.cbs.gov.il). Table 14 Main Socio Economic indicators of the Israeli Society Source: based on the 1999 household survey, CBS. Table 15 Freight in thousands of tons Monthly Bulletin of Statistics 2,2005 central bureau of statistics of Israel (www.cbs.gov.il). Table 16 Statistical Abstract of Israel 2004 No 55, table 24.4, ISRAEL RAILWAY SERVICES. Table 17 Statistical Abstract of Israel 2004 No 55, table 24.14, Motor Vehicles, by Type of Vehicle and table 2.1 The Population, by Religion and Population Group. (www.cbs.gov.il) Figure 8 Statistical Abstract of Israel 2004 No 55, table 24.14, Motor Vehicles, by Type of Vehicle (www.cbs.gov.il) Table 18 Roads, by Length and Area Statistical Abstract of Israel 2004 No 55, table 24.13, ROADS(1), BY LENGTH AND AREA (www.cbs.gov.il) Figure 9 Statistical Abstract of Israel 2004 No 55, table 24.13, and 24.14 (www.cbs.gov.il) Table 19 Interviews: The Min. of Agriculture and Rural Development, Foreign Trade Center Table 20 Statistical Abstract of Israel 2000-2004 No 51- 55, table 5.35 (in 2004), Ownership of Durable Goods, in Deciles of Households by Net Income per Standard Person (www.cbs.gov.il) Figure 10 Statistical Abstract of Israel 2000-2004 No 51- 55, table 5.35 (in 2004), Ownership of Durable Goods, in Deciles of Households by Net Income per Standard Person (www.cbs.gov.il) Figure 11 Statistical Abstract of Israel 2000-2004 No 51- 55, table 5.35 (in 2004), Ownership of Durable Goods, in Deciles of Households by Net Income per Standard Person (www.cbs.gov.il) Table 21 Statistical Abstract of Israel 2004 No 55, table 8.12, Pupils in Educational Institutions (www.cbs.gov.il) Source : Znobar 2000 http://courses.agri.huji.ac.il/71719/znobar1.pdf Figure 13, 14 From the FAO (FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS) Statistical Databases website, http://faostat.fao.org Table 22 From the FAO (FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS) Statistical Databases website, http://faostat.fao.org Table 23 From the FAO (FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS) Statistical Databases website, http://faostat.fao.org Figure 15,16,17,18,19 Statistical Abstract of Israel 2004 No 55, table 19.16 Agricultural Output Value, by Purpose (www.cbs.gov.il) Table 24 Agricultural Output Value, By Purpose NIS Million, At Current Prices-2002 - Source- ISRAEL CBS , Agricultural indicators 2004. Table 25 Statistical Abstract of Israel 2004 No 55, table 19.16 Agricultural Output Value, by Purpose (www.cbs.gov.il) Table 26 Share of local consumption (household plus industry) 2002, 2003, and changes in total production between 2002 and 2003. Statistical Abstract of Israel 2004 No 55, table 19.16 Agricultural Output Value, by Purpose (www.cbs.gov.il) Figure 20, 21 From the FAO (FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS) Statistical Databases website, http://faostat.fao.org Figure 22, 24 (we do not have 23), 25 From the FAO (FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS) Statistical Databases website, http://faostat.fao.org Table 26 Statistical Abstract of Israel 2004 No 55, table 19.19 Imports of Selected Fresh Agriculture Products (www.cbs.gov.il) Table 27 Statistical Abstract of Israel 2004 No 55, table 19.18 Exports of Selected Products (www.cbs.gov.il) Figure 26 Statistical Abstract of Israel 2004 No 55, table 19.18 Exports of Selected Products (www.cbs.gov.il) Table 28 Statistical Abstract of Israel 2004 No 55, table 16.6 Exports, by Industry and Main Country of Destination (www.cbs.gov.il) Figure 28, 29 Statistical Abstract of Israel 2004 No 55, table 16.6 Exports, by Industry and Main Country of Destination (www.cbs.gov.il) Table 29 Total & agriculture Exports by main country of destination in Million dollars Heiman and Goldschnidt, 2004 – Heiman, Amir, and E. E Goldschmidt (2004), "Testing the Potential Benefits of Brands in Horticultural Products: The Case of Oranges," HortTechnology, January-March 2004, 14(1), 28-32. Table 30, table 31 Cohen Zvi ,The Usage of Promotions in Agricultural Export, Unpublished MS.c dissertation, 1999, The Faculty of Agriculture, Food and Environmental Sciences". Table 32 Type and number of wholesalers in the domestic market –Znobar 2000. Simer Consulters, 1989 cited in http://courses.agri.huji.ac.il/71719/znobar1.pdf All the calculations of the marketing gap of vegetables Vegetables For domestic consumption -annual report 2004, the plants and Marketing Board in Israel the Vegetable Division Table 34 From the Min. of Agriculture and Rural Development the Extension Service unit (Shaham),the Farm Economics and Management Division Table 35, 36 From the Min. of Agriculture and Rural Development the Extension Service unit (Shaham),the Farm Economics and Management Division Table 37 Statistical Abstract of Israel 2004 No 55, table 14.9, Private Consumption Expenditure, by Purpose and Type of Expenditure (www.cbs.gov.il) Table 40 From the FAO (FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS) Statistical Databases website, http://faostat.fao.org Table 41 From the FAO (FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS) Statistical Databases website, http://faostat.fao.org Figure 30 From the FAO (FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS) Statistical Databases website, http://faostat.fao.org Table 41 From the FAO (FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS) Statistical Databases website, http://faostat.fao.org Figure 31 From the FAO (FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS) Statistical Databases website, http://faostat.fao.org Table 42 From the FAO (FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS) Statistical Databases website, http://faostat.fao.org Figure 31-A Figure 32 From the FAO (FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS) Statistical Databases website, http://faostat.fao.org Figures 33 and 34. and 35 Statistical Abstract of Israel 2004 No 55, table 19.20 & Statistical Abstract of Israel 2002 No 53, table 19.20 & Statistical Abstract of Israel 2000 No 51, table 19.20 & Statistical Abstract of Israel 1995 No 46, table 13.15. Table 43 Statistical Abstract of Israel 1995-2004 No46- 55 table 20.7 (in 2004), Manufacturing Production and Employees, by Industry Table 44 food manufacturing and Processing Establishments Statistical Abstract of Israel 1995-2004 No46- 55 table 20.7 (in 2004), Manufacturing Production and Employees, by Industry Globs, 2002 Sigan Simha, "David and Goliath- The Big Chains defeat the neighborhood groceries everywhere, not only in Israel," Globs, 12/09/2002.

Source: http://eumed-agpol.iamm.fr/html/publications/prj_report/d6_israel.pdf