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15. Israel

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Support to agriculture

Despite continued efforts to introduce market-oriented reforms, total support to agriculture in Israel continued to increase from 2017 to 2019, which reflects mostly the persistence of regulations, price controls and border protection targeting specific commodities.

The share of producer support in gross farm receipts (%PSE) reached 16.7% in 2017-19, close to the OECD average. At the same time, the share of potentially most market-distorting forms of support in Israel (91%) is much higher than the OECD average. This can be explained by the persistence of domestic price support and border measures in favour of several meat and dairy products and of selected fruits and vegetables. Poultry and milk producers still benefit from the largest share of market price support, accounting for 33% of the total PSE in 2017-19. Total support for agriculture (TSE) remained stable at 0.4% of GDP.

The share of General Services Support Estimates (GSSE) in total support in 2017-19 represented 13% of TSE and 5% of agriculture value-added, the latter being below the OECD average. Public spending to finance general services increased 7% in 2019 due to additional expenditures for the development and maintenance of infrastructure, and for the agricultural knowledge and innovation system.

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Main policy changes

Due to two inconclusive elections in April and September 2019, Israel was governed by a transitional government for most of the year, which prevented substantial changes in policy, including progress on initiated reforms in the dairy and egg sectors.

Following higher annual precipitation, the Water Authority increased the water quota for agriculture in the national system and the northern region. At the same time the water pricing reform for agriculture, which aims towards a convergence of water prices, continued to be implemented, with producers affected by rising prices being compensated with grants and contribution to water investments.

Building on past and ongoing efforts to support the future viability of agriculture, the government established a National Centre for the Application and Development of Genome Editing Technologies in Agriculture and launched a new programme to encourage interactions between public research and the industry.

Efforts to improve nutrition continued with a programme to educate children on the consumption of vegetables and fruits and the implementation, on 1 January 2020, of a mandatory nutritional labelling scheme providing warning labels on packaged food to signal excessive sugar, sodium and saturated fat levels.

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Assessment and recommendations

  • The level of support to agriculture in Israel has continued to increase as selected commodities are insulated from international markets. The focus on price support effectively raises market distortions and taxes for consumers, and can be harmful for the environment and impede adaptation to climate change.

  • The electoral standstill in 2019 should not discourage the Israel government from finalising its needed reforms in the milk and egg sectors. Even with the expected progress they may achieve, and the gradual tariff reform of the beef sector, other commodities remain subject to high border protection. Israel maintains high tariffs for goods such as poultry meat, sheep meat and certain fruits and vegetables that could be gradually removed and, if necessary, replaced temporarily by direct payments. The tariff system for agriculture should also be simplified, avoiding non-ad valorem tariffs.

  • Israel should continue and intensify its ongoing efforts to diminish the regulatory burden and improve transparency and competition in the agro-food chain. Progress made in these areas would not only reduce trade costs and encourage trade flows, but would also diminish costs for the processing industry and prices for the final consumers of agro-food products.

  • Expenditures on agricultural knowledge and innovation systems have been continuously increasing, following the trend of the OECD average, which should help the country remain at the cutting edge of new agriculture technologies.

  • Israel’s skilled farmers and comprehensive water management system has enabled the country to sustain a productive agricultural sector under very intense water stress and contributes to the sector’s adaptation to future water risks. Still, the system’s flexibility could be improved by facilitating further trading in water allocations among irrigating farmers or with other water users, and the use of optional compensations for unused water quotas.

  • Due to agriculture’s limited share of the country’s total greenhouse gas (GHG) emissions (less than 3%), Israel has not developed GHG mitigation policies that are specific to the agricultural sector. It should ensure that GHG emissions generated by the sector’s energy and water needs are fully accounted for in its mitigation efforts.

  • More generally, the government should accelerate its efforts to reduce the sector’s negative environmental impacts. Improvements should be sought, in particular, to reduce the high and increasing nitrogen surplus associated with agriculture production. Reforming agriculture policies that encourage production would contribute to that effort. Regional agri-environmental programmes should also be bolstered and complemented by targeted policies and regulations geared towards higher environmental performance.

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Policy responses in relation to the COVID-19 outbreak

Following the spread of the COVID-19 the government of Israel issued emergency regulations, including various restrictions, on commercial activities in order to reduce the infection and the virus spread. Agricultural production and related industry and services (such as carcass clearances, veterinarians, or agricultural machinery manufacturers) are considered essential and are therefore excluded from these regulations.

Agricultural policies

To reduce the activities of government ministries and their autonomous units, a limited number of “essential” employees have been allowed to continue their work activities. In the Ministry of Agriculture and Rural Development (MARD), as in the majority of the public sector, 33% of employees were originally considered essential, a proportion that gradually climbed to 51% in late April. Services in farms and ports of entry, such as plant protection inspectors and veterinarians, have continued, even if teleworking and focusing on urgent work were encouraged.

MARD has conducted daily assessment of the availability of fresh agricultural produce, to identify missing items and allow their importation when needed. For example, WTO quotas have been increased to import onions, cucumbers and eggs. The plant protection and inspection services (PPIS) and veterinary and animal health services (IVSAH) have also facilitated imports by accepting official and scanned copies of original phytosanitary or health certificates, as well as e-certifications that can be verified, for specific products and under certain conditions.

Due to the spread of the epidemic, the entry of foreign workers and Palestinian workers into the State of Israel has been restricted, and the following measures have been taken:

  • Foreign workers. MARD has applied to the Population Authority to extend the work visa to Thai workers whose visas are about to expire and who cannot be replaced in the near future. The Population Authority has also issued a special mobility procedure for the overall crisis period, so that, with his or her consent, a worker can be moved for a short period of less than one month to another farm without the need for prior approval, even if the movement is not carried out within the same village. This flexibility was introduced as some industries, such as the flower sector, reduced their activity significantly while other industries greatly increased their need for workers, due to unavailable workers or increased consumer demand.

  • Activating volunteers. In agreement with the Ministry of Finance, a special fund of ILS 6 million (USD 1.7 million) was granted to support public institutions recruiting volunteers to replace absent agricultural workers. The procedure only supports the logistical expenses associated with volunteer workers, such as transportation, food, accommodation and management of the recruiting system.

Agro-food supply chain policies

The outbreak of the epidemic and the isolation guidelines have accelerated the launching of e-commerce platforms, under the auspices of MARD and the Innovation Authority.

Consumer policies

The Economy Ministry is taking action against business owners who have taken advantage of the coronavirus crisis to raise the cost of foods above government fixed prices (just before Passover holidays), with increased enforcement followed consumer complaints. Criminal fines of up to tens of thousands of Israeli shekels are given to business owners found to have broken the law by raising the cost of these specific foods. As of 7 April infractions had been found concerning eggs, milk, cheese, and challah bread (Jean, 2020[1]).

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Figure 15.1. Israel: Development of support to agriculture
Figure 15.1. Israel: Development of support to agriculture

Note: * Share of potentially most distorting transfers in cumulated gross producer transfers.

Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.

 StatLink https://doi.org/10.1787/888934144306

Support to producers (%PSE) has moderately declined between 2000-02 and 2017-19. At the same time, the share of potentially most distorting transfers remains high in the last two decades due to high market price support (MPS) and continued border protection (Figure 15.1). From 2018 to 2019, the level of support rose by 4.6%, due to an increase in price distorting measures (Figure 15.2). Effective average prices received by farmers declined by 3% but remain 19% higher than world prices, with large differences between commodities. MPS is the main component of Single Commodity Transfers (SCT): bananas, tomatoes, milk and poultry have the highest share of SCT in commodity gross farm receipts (Figure 15.3). Overall, SCT represent 88% of the total PSE. The expenditures for general services (GSSE), mainly on knowledge and infrastructure, have slightly declined relative to agriculture value added between 2000-02 and 2017-19.

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Figure 15.2. Israel: Drivers of the change in PSE, 2018 to 2019
Figure 15.2. Israel: Drivers of the change in PSE, 2018 to 2019

Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.

 StatLink https://doi.org/10.1787/888934144325

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Figure 15.3. Israel: Transfer to specific commodities (SCT), 2017-19
Figure 15.3. Israel: Transfer to specific commodities (SCT), 2017-19

Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), https://doi.org/10.1787/agr-pcse-data-en.

 StatLink https://doi.org/10.1787/888934144344

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Table 15.1. Israel: Estimates of support to agriculture
Million USD

2000-02

2017-19

2017

2018

2019p

Total value of production (at farm gate)

3 337

8 416

8 301

8 461

8 485

of which: share of MPS commodities (%)

55.3

54.3

54.4

54.6

53.7

Total value of consumption (at farm gate)

3 666

10 521

9 757

11 431

10 374

Producer Support Estimate (PSE)

714

1 445

1 384

1 436

1 515

Support based on commodity output

519

1 227

1 146

1 208

1 328

Market Price Support1

509

1 211

1 130

1 191

1 312

Positive Market Price Support

522

1 212

1 131

1 193

1 313

Negative Market Price Support

-14

-1

-1

-2

-1

Payments based on output

10

16

16

17

16

Payments based on input use

160

127

154

116

110

Based on variable input use

106

89

105

84

79

with input constraints

0

0

0

0

0

Based on fixed capital formation

42

20

26

17

18

with input constraints

0

0

0

0

0

Based on on-farm services

12

18

24

15

14

with input constraints

0

0

0

0

0

Payments based on current A/An/R/I, production required

25

82

76

97

72

Based on Receipts / Income

21

63

60

77

52

Based on Area planted / Animal numbers

4

19

16

20

20

with input constraints

0

0

0

0

0

Payments based on non-current A/An/R/I, production required

0

0

0

0

0

Payments based on non-current A/An/R/I, production not required

8

9

8

14

5

With variable payment rates

5

9

8

14

5

with commodity exceptions

0

0

0

0

0

With fixed payment rates

2

0

0

0

0

with commodity exceptions

0

0

0

0

0

Payments based on non-commodity criteria

0

0

0

0

0

Based on long-term resource retirement

0

0

0

0

0

Based on a specific non-commodity output

0

0

0

0

0

Based on other non-commodity criteria

0

0

0

0

0

Miscellaneous payments

1

0

0

0

0

Percentage PSE (%)

19.9

16.7

16.2

16.5

17.4

Producer NPC (coeff.)

1.19

1.17

1.16

1.17

1.19

Producer NAC (coeff.)

1.25

1.20

1.19

1.20

1.21

General Services Support Estimate (GSSE)

100

224

206

226

241

Agricultural knowledge and innovation system

51

97

88

99

103

Inspection and control

16

27

31

24

25

Development and maintenance of infrastructure

10

83

70

82

96

Marketing and promotion

11

1

1

1

1

Cost of public stockholding

12

11

12

11

9

Miscellaneous

0

6

3

8

7

Percentage GSSE (% of TSE)

12.4

13.4

13.0

13.6

13.7

Consumer Support Estimate (CSE)

-648

-1 762

-1 477

-2 070

-1 739

Transfers to producers from consumers

-473

-1 202

-1 109

-1 216

-1 281

Other transfers from consumers

-180

-563

-371

-858

-459

Transfers to consumers from taxpayers

0

0

0

0

0

Excess feed cost

5

3

2

4

2

Percentage CSE (%)

-17.4

-16.7

-15.1

-18.1

-16.8

Consumer NPC (coeff.)

1.21

1.20

1.18

1.22

1.20

Consumer NAC (coeff.)

1.21

1.20

1.18

1.22

1.20

Total Support Estimate (TSE)

814

1 669

1 590

1 662

1 756

Transfers from consumers

653

1 765

1 480

2 073

1 741

Transfers from taxpayers

341

468

482

446

475

Budget revenues

-180

-563

-371

-858

-459

Percentage TSE (% of GDP)

0.6

0.4

0.5

0.4

0.4

Total Budgetary Support Estimate (TBSE)

305

458

460

470

444

Percentage TBSE (% of GDP)

0.2

0.1

0.1

0.1

0.1

GDP deflator (2000-02=100)

100

134

132

133

136

Exchange rate (national currency per USD)

4.34

3.59

3.60

3.60

3.56

Note: p: provisional. NPC: Nominal Protection Coefficient. NAC: Nominal Assistance Coefficient. A/An/R/I: Area planted/Animal numbers/Receipts/Income. The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. 1. Market Price Support (MPS) is net of producer levies and excess feed cost. MPS commodities for Israel are: wheat, cotton, groundnuts, tomatoes, peppers, potatoes, avocados, bananas, oranges, grapefruit, grapes, apples, milk, beef and veal, sheep meat, poultry and eggs.

Source: OECD (2020), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database) https://doi.org/10.1787/agr-pcse-data-en.

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Contextual information

Israel’s economy is relatively small but has been growing rapidly and its GDP per capita almost doubled over the last two decades, even as the population increased by 50%. The share of agriculture in total employment and in GDP has fallen to around 1%. Israel is unique among developed countries in that land and water resources are nearly all state-owned. Jewish rural communities, principally the kibbutz and moshav, dominate agricultural production, accounting for about 80% of agricultural output. Partly due to this structure, total agricultural area has moderately increased over the past twenty years, despite the country’s continued development. While the agricultural sector is relatively diversified, most of the value of production and exports is generated by high value fruits and vegetables.

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Table 15.2. Israel: Contextual indicators

 

Israel

International comparison

 

2000*

2018*

2000*

2018*

Economic context

 

 

Share in total of all countries

GDP (billion USD in PPPs)

157

358

0.4%

0.3%

Population (million)

6

9

0.1%

0.2%

Land area (thousand km2)

22

22

0.03%

0.03%

Agricultural area (AA) (thousand ha)

566

623

0.02%

0.02%

 

 

 

All countries¹

Population density (inhabitants/km2)

290

407

53

62

GDP per capita (USD in PPPs)

24 870

40 269

9 275

21 924

Trade as % of GDP

25

19

12.4

15.3

Agriculture in the economy

 

 

All countries¹

Agriculture in GDP (%)

1.4

1.3

3.1

3.6

Agriculture share in employment (%)

2.2

0.9

-

-

Agro-food exports (% of total exports)

3.1

3.6

6.2

7.3

Agro-food imports (% of total imports)

5.3

7.8

5.5

6.3

Characteristics of the agricultural sector

 

 

All countries¹

Crop in total agricultural production (%)

55

59

-

-

Livestock in total agricultural production (%)

45

41

-

-

Share of arable land in AA (%)

60

62

32

33

Notes: *or closest available year. 1. Average of all countries covered in this report. EU treated as one.

Sources: OECD statistical databases; UN Comtrade; World Bank, WDI and national data.

Israel maintains a highly performing economy among OECD countries, with robust GDP growth, exceeding 3% per year and close to full employment in 2018-19. After two years of deflationary pressure, moderate inflation started again in 2017-18 (Figure 15.4).

The agriculture trade balance of Israel continued to decline in 2018, with the value of imports of mostly processed food products exceeding the value of exports of mainly primary commodities (Figure 15.5). This gradual shift may partly reflect the relative appreciation of the Israeli currency compared to the US dollar and the Euro since 2015.

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Figure 15.4. Israel: Main economic indicators, 2000 to 2019
Figure 15.4. Israel: Main economic indicators, 2000 to 2019

Sources: OECD statistical databases; World Bank, WDI and ILO estimates and projections.

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Figure 15.5. Israel: Agro-food trade
Figure 15.5. Israel: Agro-food trade

Note: Numbers may not add up to 100 due to rounding.

Source: UN Comtrade Database.

The productivity of Israeli agriculture is generally high but its increase has been slowing in recent years. The relatively low estimated growth rate in agriculture total factor productivity (TFP) in 2007-16 may be partially attributed to the moderate increase in the value of output.

While agriculture’s resource use has improved, the environmental performance of Israel’s agriculture has degraded since 2000. During 2000-18, agriculture’s share of freshwater abstraction has halved, largely due to changes in water management. At the same time, nutrient surpluses have grown significantly, with nitrogen balances increasing by 25% to reach a level seven times above the OECD average level.

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Figure 15.6. Israel: Composition of agricultural output growth, 2007-16
Figure 15.6. Israel: Composition of agricultural output growth, 2007-16

Note: Primary factors comprise labour, land, livestock and machinery.

Source: USDA Economic Research Service Agricultural Productivity database.

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Table 15.3. Israel: Productivity and environmental indicators

 

Israel

International comparison

 

1991-2000

2007-2016

1991-2000

2007-2016

 

 

 

World

TFP annual growth rate (%)

3.5%

1.3%

1.6%

1.6%

 

 

OECD average

Environmental indicators

2000*

2018*

2000*

2018*

Nitrogen balance, kg/ha

188.8

236.2

33.3

29.1

Phosphorus balance, kg/ha

65.7

68.9

3.3

2.3

Agriculture share of total energy use (%)

1.2

1.6

1.7

2.0

Agriculture share of GHG emissions (%)

3.3

2.6

8.1

8.9

Share of irrigated land in AA (%)

43.4

..

-

-

Share of agriculture in water abstractions (%)¹

64.0

32.0

46.0

49.0

Water stress indicator

61.0

42.1

9.9

8.9

Notes: * or closest available year. 1. Share of agriculture fresh water abstraction in total fresh water abstraction.

Sources: USDA Economic Research Service, Agricultural Productivity database; OECD statistical databases; FAO database and national data.

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Description of policy developments

Main policy instruments

Over the past thirty years, Israel has implemented a number of reforms related to the provision of subsidies, central planning of agricultural industries, and the allocation of production quotas, price controls and import protection. The government continues to be involved in the allocation of key factors of production such as land, water and foreign workers. Land and water resources are almost entirely state-owned. Land is allocated to farmers for a nominal fee and is not tradeable. Water is allocated to farmers through a quota system; all water consumption is metered and charged. The government also applies a yearly quota of foreign workers with permits to work in agriculture. Both the overall quota and the allocation of workers to individual farmers are strictly regulated.

Some commodities continue to be supported by guaranteed prices and production quotas. Guaranteed prices for milk are based on the average cost of production and while they are updated regularly, they diverge considerably from the level and evolution of prices on international markets. Minimum prices are also guaranteed for wheat, based on the Chicago market price, adjusted for quality and transportation costs. Egg production quotas and recommended prices, which serve as the basis for calculating the maximum retail prices are applied as an instrument to provide price support to producers. On the other hand, consumer price controls are applied for a range of basic food products, including bread, milk and dairy products, eggs and salt. Egg and poultry producers in “peripheral areas” at the northern border receive payments, based on output levels for egg, and encompassing a mixture of payments decoupled from production and output payments for poultry producers (OECD, 2010[2]).

Support to investments is provided by capital grants. Farmers who participate in the investment support scheme are also entitled to income tax exemptions and accelerated depreciation. Since 2009, an investment support programme has been implemented to partly replace foreign workers in the agricultural sector, but budgetary allocations for this programme declined strongly in recent years.

Insurance schemes provided by the Insurance Fund for Natural Risks in Agriculture (Kanat) are subsidised. The share of the support in the total insurance premium is 80% in the case of the multi-risk insurance schemes and 35% in the case of the insurance schemes against natural hazards. Since 2010, revenue insurance has been applied for rain-fed crops to protect against a loss of revenue caused by price decrease, low yields or a combination of both.

In 2015, a credit fund was launched with the goal of helping establish or expand small farms that specialise in crop production. The government serves as the loan guarantor for bank loans with 85% guarantee, to ensure small farms with insufficient collateral can access loans.

Israel’s economy is supported by a transparent and open trade regime overall. However, border tariff protection on agri-food products remains an important tool in supporting agricultural producers. Israel’s average applied MFN tariff on agricultural goods (WTO definition) amounted to 19.1% in 2018, down from 27.7% in 2012, but still much higher than the 3% average for non-agricultural goods (WTO, 2018[3]). Israel has tariff rate quotas (TRQs) for wheat, fats and oils, walnuts, prunes, maize, citrus juices, beef and sheep meat and various dairy products. Most of Israel’s preferential trade agreements also include tariff-quota commitments for agricultural products, often with reduced out-of-quota tariffs. In total, Israel implements 258 preferential TRQs for agricultural goods (WTO, 2018[3]).

Despite certain reforms that began in 2014, Israel’s tariff profile for agricultural products remains highly uneven, with high – sometimes prohibitive – tariffs for goods such as dairy products, eggs and certain fruits and vegetables, and low, sometimes zero, tariffs for other commodities such as specific coarse grains, sugar, oilseed and frozen beef. The tariff system on agriculture is also complicated, involving specific, compound or mixed duties (WTO, 2018[3]); 20% of imported agricultural products are subjected to non-ad valorem rates, compared to 3.8% for all goods (Ibid.). At the same time, some 55.6% of agriculture imports entered Israel duty-free, mostly through MFN duty-free access and under preferential agreements (the most important ones are with the European Union and the United States) (WTO/ITC/UNCTAD, 2019[4]). With the exception of beef, poultry (including turkey), and mutton and products thereof, there is no legal requirement for imported food and agricultural products to be kosher, although imported, non-kosher agro-food products are rarely accepted by local marketing channels.

Budgetary allocations for Research and Development have regularly increased and have accounted for over 20% of the total agriculture-related budget in recent years. During 2017-19, ILS 344 million (USD 96 million) were allocated annually to agriculture research and development, of which almost ILS 73 million (USD 20 million) were used for a competitive research fund each year. This, together with an effective transmission of innovations to the farm level through a public extension service, has allowed Israel to become a world leader in agricultural technology, particularly for farming in arid and desert conditions.

Israel has not developed sector-specific policy measures for greenhouse gas (GHG) mitigation in agriculture, given that agriculture accounts for a limited share of the country’s total greenhouse gas emissions (2.7% in 2018). However, the government has introduced and applied a number of programmes to support climate change adaptation. In addition to its forward-looking water resource management, in which irrigation largely relies on recycled wastewater, the government supports research and development programmes on improved agronomic practices, breeding, soil conservation and efficient use of resources and maintains the Israel Plant Gene Bank to conserve indigenous plant species. Efforts to develop a national quantitative assessment of climate change risks for agriculture are ongoing (OECD, 2019[5]).

Domestic policy developments in 2019-20

Israel held two successive general elections in April and September 2019, which did not lead to the formation of a government. As a result, Israel was governed for most of 2019 by a transitional government, putting on hold any substantial changes in government policy, including in agriculture, until a government is formed.

In particular, reforms of support for animal production, which had been initiated in 2018 or earlier, remained at a standstill. At the end of October 2018, an outline for a new reform was signed between the government and the representatives of the dairy farmers. The outline of the reform included a reduction of target prices, a reduction of customs tariff, subsidies for increasing the efficiency of dairy farms, and support for dairy farmers leaving dairy production. The reform process aims to lead to structural change in the sector, increasing the average size and enhancing the efficiency of dairy operations. However, the reform agreement requires a change in legislation to be implemented; a memorandum of law was issued on the subject but the examination of the law was postponed until after the March 2020 general elections.

Similarly, the reform programme for the table egg sector was put on hold until the formation of a new government. In the meantime, the Ministry of Agriculture and Rural Development (MARD) has increased enforcement of sanitary conditions in poultry houses, and extended a call for proposals and tenders for constructing poultry house complexes for a budget of ILS 50 million (USD 13 million). In 2019, grant applications were submitted, and the evaluation of the applications and their approval is nearly complete. At the same time, the Galilee Law, which was introduced in 1988 to support holders of egg production quotas or broiler in the Galilee region, with the intention to be phased out in 2017, was renewed in 2018 and continued in 2019.

A reform was initiated to simplify and reduce the administrative costs of setting maximum consumer price for some dairy products. The joint price committee of the Finance and Agricultural Ministries determines maximum wholesale prices of specific dairy products as well as maximum consumer prices. The recommended prices then have to be signed by the Finance and Agriculture Ministers to come into effect. In order to simplify the price update procedure and to reduce its regulatory cost, MARD initiated a reform that will establish an automatic professional process to update the regulated maximum prices, with the objective of establishing more transparency and certainty for dairies.

The government also continued to improve the agriculture marketing system for fresh fruits and vegetables to reduce costs and possible consumer price pressures. In 2017, MARD conducted a regulatory impact assessment (RIA) of unfair trade practices to evaluate alternatives for improving commercial relations between farmers and wholesalers/retailers of fresh fruit and vegetables. The results of this RIA prompted MARD to develop a draft voluntary code of conduct in 2018. This code of conduct was finalised in the first half of 2019 and published in June 2019. The effectiveness of the code is to be evaluated during the coming years, and if necessary, the code will be transformed into a binding regulation.

Despite intended efforts to reduce food prices, the guaranteed price of eggs continued to increase nominally by an average of 7% from 2018 to 2019. Milk target prices declined by 2% from 2018. Still, the national producer price for milk remained significantly higher than international prices. Milk accounts for 18% of the total market price support measured for the Israeli agriculture in 2018 and hence still contributes significantly to the relatively high level of Israel’s farm support.

In the last few years, the Plants Production and Marketing Board has been promoting a special programme for encouraging young people to consume vegetables and fruits. The scheme is being carried out in co-operation with MARD (with a budget of ILS 225 000 – USD 63 000 – in 2019) and the approval of the Ministry of Education. This programme is taking place at 200 elementary schools all around Israel. It emphasises the importance of eating fresh fruits and vegetables every day. During 2019, the PPIS (the Israeli Plant Protection and Inspection Services) joined the programme, aiming to educate children to avoid non-inspected fresh produce arriving from abroad, in order to prevent the entry of pests and diseases that would damage domestic plants and harm the environment.

The 2017 regulation on nutritional labelling entered into force on 1 January 2020 (USDA FAS, 2018[6]). This regulation requires red labels on the front of packaged food to signal high levels of sugar, sodium, and saturated fat. In the first phase of implementation, during 2020, only products exceeding 500 mg of sodium, 13.5 g of sugar or 5 g of saturated fats per 100 g of product will be labelled. These threshold levels for labelling will decrease in 2021 (Ibid.).

In 2019, the six-year long drought ended and precipitations exceeded the long-term average,1 rising water levels in the Sea of Galilee above the lower red line,2 although aquifers level remained low. The Water Authority increased the water quota for agriculture in the national system and the northern region. The allocation in the national system was 305 million cubic meters. As the forecast for 2020 is slightly below the long-term average, the Water Authority will again reduce the allocation for agriculture with an initial quota of 272 million cubic meters in the national system. If the amount of rainfall exceeds the perennial average, a larger allocation will be approved (up to 325 million cubic meters). In the North, the allocation remains the same as in 2019. Despite increasing its water levels, the salinity of the Sea of Galilee remained high, endangering the ecological stability of the lake. The implementation of the 2018 plan for connecting the Sea of Galilee to the national system to cope with this problem has begun (OECD, 2019[5]). The government is also considering the possibility of connecting the Upper Galilee region to the national system. Work on the additional desalination plant in Sorek is advancing and a tender was sent out to select the company building and managing the future plant.

In parallel, the government continued to implement the 2017 reform of the agriculture water pricing system, which aims for a convergence in water prices nationally for equity purposes (OECD, 2018[7]). Water prices for private producers were raised for a third time, while water prices for all consumers of the national company Mekorot declined to ILS 1.54/m3 (USD 0.43/m3) for areas lacking alternative water sources and to ILS 1.84/m3 (USD 0.52/m3) for the rest of the country. Financial support continued to be allocated to private producers in the Hula Valley area to ensure that the peatlands are irrigated for ecological reasons. Other producers considered eligible have started to receive their compensation in 2019, comprising of 20% as grants and 80% as participation in water investments.

The government also continued to invest in the future viability of its agricultural sector through innovation from research to application. In 2019, MARD and the Israel Innovation Authority (IIA) provided ILS 23 million (USD 6.4 million) of cost-share grants, with a participation of 30-60% of the eligible costs to support agriculture technology start-ups. Three types of grants were offered: R&D grants to companies, grants supporting the co-operation between regional R&D Centres and private companies, and those supporting the development of new products (prototypes). To promote emerging agro-tech industry MARD also established a pool of outstanding start-ups in a competitive process, and selected the top 32 companies offering the best products (using a budget of ILS 1.6 million- USD 0.4 million).

MARD also established the National Centre for the Application and Development of Genome Editing Technologies in Agriculture in Israel (for a budget of ILS 58 million – USD 16 million). The Centre aims to develop the bio-technological capacity of the country, and at the same time develop valuable crop varieties or animal breeds that can contribute directly or indirectly to food security. This includes innovations intended (a) to increase agricultural production, through the genetic improvement of fish and pest-resistant crops; (b) to improve the competitiveness of farms and the income of farmers and other actors in the food sector via quality improvement and the reduction of marketing costs; and (c) to improve food safety and food quality, by adding value to traditional local products.

A new government programme was initiated in 2019 to encourage further interactions between public research and industry. The ILS 14 million (USD 4 million) cost-share fund entitled “Noah’s Ark” Channel (with state covering 70% of eligible costs) is set to encourage pairing academy and industry to create research foundations in various fields in order to invigorate applied R&D activities that will contribute to bolster science, economy and industry nationally and internationally in the short to medium term. Applicants are asked to conduct innovative research and to develop the short-term commercial application of the research findings. In the agriculture field, a wide number of topics are eligible for funded collaboration, including on agriculture inputs and machinery, digital agriculture innovation, precision agriculture technologies, plant protection, post-harvest improvement, food processing, food quality and food safety.

In preparation for the religious sabbatical year (Jewish Shmita), which will take place from September 2021 to September 2022, MARD and the Ministry of Finance signed an agreement whereby they offered to triple participating farmers’ savings in order for them to cope with the loss of income during the year. About 650 applications were submitted in 2019, and preliminary estimates indicate that the total demand may exceed the planned budgetary allocation (ILS 81 million – USD 23 million – for 2018-21, ibid.). A notice regarding the need to increase and adjust the budget, in order to meet needs and demand, has been forwarded to the Ministry of Finance and other involved parties.

Trade policy developments in 2019-20

The September 2016 reform agreement on the beef sector will reach a milestone in 2020. The agreement involves partial conversion of farm support programmes for beef producers from indirect support, by means of tariff rate quotas and tariffs, to a system of payments. The quotas for duty free fresh and chilled beef imports increased gradually from 6 000 tonnes in 2015 to its ceiling of 17 500 tonnes in 2020 and the MFN customs rates for out-of-quota beef imports decreased gradually from 12% and ILS 13/kg (USD 3.9/kg) in 2015 to 12% and zero ILS/kg in 2020 (WTO, 2018[3]). This partial opening of the beef market is accompanied by compensation for cattle farmers, paid on top of the existing seven-year support programme agreed in 2014. This additional support amounted to ILS 14 million (USD 4 million) in 2019 and will reach ILS 16 million (USD 4.5 million) in 2021 and then remain at this level until 2024 (Ibid.). Payments are to be made per unit of pasture area.

A revised free trade agreements (FTA) was signed with the European Free Trade Association (EFTA) in 2018 and a new FTA was signed with Ukraine in January 2019, but both have still to be ratified. The revised FTA with Canada was ratified in 2018 and tariff concession tables were revised in September 2019. A new FTA with Panama signed on May 2018 has been ratified and came into force in January 2020. Negotiations on new FTAs with Korea were concluded in 2019. Negotiations on new FTAs with the People’s Republic of China, Viet Nam and the Eurasian Economic Union (EAEU), are at varying stages of progress. A revised United States–Israel Agreement on Trade in Agricultural Products (ATAP) is also under negotiation.

References

[9] Israel Ministry of Environmental Protection (2020), Sea of Galilee (Kinneret), Ministry of Environmental Protection, Jerusalem,, consulted March 2020., http://www.sviva.gov.il/English/env_topics/MajorBodiesOfWater/Pages/SeaOfGalilee.aspx.

[1] Jean, C. (2020), “Business owners exploit coronavirus crisis to raise food prices”, Jerusalem Post, https://www.jpost.com/Israel-News/Business-owners-exploit-coronavirus-crisis-to-raise-food-prices-623949.

[5] OECD (2019), “Israel”, in Agricultural Policy Monitoring and Evaluation 2019, OECD Publishing, Paris, https://dx.doi.org/10.1787/c68c69f3-en.

[7] OECD (2018), “Israel”, in Agricultural Policy Monitoring and Evaluation 2018, OECD Publishing, Paris, https://dx.doi.org/10.1787/agr_pol-2018-16-en.

[2] OECD (2010), OECD Review of Agricultural Policies: Israel 2010, OECD Publishing, Paris, https://doi.org/10.1787/9789264079397-en.

[8] USDA FAS (2019), Citrus Annual- Israel, USDA GAIN report, United States Department of Agriculture, Washington DC.

[6] USDA FAS (2018), Israel- Food and Agricultural Import Regulations and Standards Report, FAIRS Annual Country Report 2018, United States Department of Agriculture, Washington DC.

[3] WTO (2018), “Trade Policy Review: Israel”, Secretariat Report, World Trade Organization, Geneva.

[4] WTO/ITC/UNCTAD (2019), World Tariff Profiles 2018, World Trade Organization, International Trade Centre and United Nations Conference on Trade and Development, https://www.wto.org/english/res_e/booksp_e/tariff_profiles19_e.pdf.

Notes

← 1. Heavy rainfalls actually contributed to the reduction of citrus production, due to harvesting difficulties and quality impairments (USDA FAS, 2019[8]).

← 2. The lower red line for the Sea of Galilee, a hydrological limit to define a level below which the lake is threatened, preventing pumping, is defined by regulations as -213 meters below sea level. The upper red line, equal to -209 meters below sea level, defined a level above which flooding may occur (and triggering the opening of the Deganya dam) (Israel Ministry of Environmental Protection, 2020[9]). Because rainfalls in 2019 were above the average, the water level of the Sea of Galilee exceeded the lower red line.

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