Agricultural Policy Monitoring and Evaluation 2021

15. Israel

Support to agriculture

Despite efforts to introduce market-oriented reforms and temporary measures to lift trade restrictions at the early stages of the COVID-19 pandemic, total support to agriculture in Israel continued to increase from 2018 to 2020. This mostly reflects the persistence of regulations, price controls and border protection targeting specific commodities. The total support estimate (TSE) amounted to 0.5% of GDP in 2018-20.

The share of producer support in gross farm receipts (%PSE) reached 18.3% in 2018-20, close to the current OECD average and slightly below the 2000-02 level of 19%, but well above levels seen in the late 2000s and early 2010s. At the same time, the share of potentially most-distorting forms of support in Israel (92%) remains 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 selected fruits and vegetables. Poultry and milk producers benefit from the largest share of market price support, accounting for 41% of the total producer support in 2018-20.

Single commodity transfers (SCT) represented 87% of the total PSE in 2018-20. Market price support is the main component of SCT: tomatoes, bananas, milk, poultry and grapes have the highest share of SCT in commodity gross farm receipts.

The share of general services support estimates (GSSE) in total support in 2018-20 amounted to 5.5% of agriculture value-added, close to the OECD average, and a higher proportion than in 2000-02. These expenditures focused mostly on agricultural innovation and infrastructure. Public spending to finance general services increased 20% in 2020 due to additional expenditures mostly related to hydrological infrastructure.

Recent policy changes

In 2020, the government of Israel undertook a number of measures in response to the COVID-19 pandemic and associated lockdowns. These include lockdown regulation exemptions for the agriculture and food sector, measures to ensure the function of government services, easing restrictions on foreign agricultural labour and encouraging volunteer workers to support agricultural activities, opening water quotas, providing relief to affected agricultural exporters, encouraging the development of e-commerce, and ensuring the supply and affordability of food in particular via temporary opening of import quotas for selected products.

The pandemic and prolonged legislative challenges continued to delay agriculture reforms envisioned for 2019. A parliamentary election – the third in less than a year – and unsuccessful negotiations on the state budget put any substantial changes in agricultural support policies on hold.

The Ministry of Agriculture and Rural Development (MARD) reached an agreement with the Israel Land Authority allocating ILS 21 million (USD 6.1 million) for each of the next three years to the implementation of sustainable eco-friendly farming practices for soil conservation, enabling the agricultural sector to take a significant part in the global effort for greenhouse gas (GHG) reduction.

The FTA with Ukraine signed in 2019, a United Kingdom-Israel Free Trade Agreement, and a related protocol for the mutual recognition of organic produce entered into force on 1 January 2021. The FTA with Colombia signed in 2013, and the FTA with Panama signed in 2018, were ratified in 2020 and their concessions apply.

Normalisation agreements (known as the “Abraham Accords”) were signed in the second half of 2020, followed by Memorandums of Understanding on, inter alia, promoting bilateral agricultural trade, especially with the United Arab Emirates and Bahrain.

Assessment and recommendations

• Israel took swift, necessary and proportionate measures to respond to the COVID‑19 crisis in the agriculture and food sector in 2020. It should pursue the plan of its recovery package under the Acceleration Plan, particularly by investing in research and development, digitalisation of markets and infrastructure, and phase out relief measures that support the sector as it transitions out of the crisis.

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

• The COVID-19 crisis and electoral challenges in 2020 should not discourage the Israeli Government from finalising needed reforms in the milk and egg sectors. Even with the progress they are expected to achieve, and the gradual tariff reform of the beef sector, commodities remain subject to high border protection. Israel maintains high tariffs for goods such as poultry meat, sheep meat, and certain fruits and vegetables. These 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.

• Expenditures on agricultural knowledge and innovation systems have continuously increased, 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, continued investments and comprehensive water management system enable the country to sustain a productive agricultural sector under very intense water stress and contribute to the sector’s adaptation to future water risks. Still, the system’s sustainability and flexibility could be improved by ensuring that farmers are charged water prices in line with marginal costs of supplying water, by facilitating further trading in water allocations among irrigating farmers and other water users, and by the use of optional compensations for unused water quotas.

• The government should build on recent initiatives to accelerate reduction of the sector’s negative environmental impacts. It should ensure that GHG emissions generated by the sector’s activities, energy and water needs are fully accounted for in its mitigation efforts. Improvements should also reduce the high and increasing nitrogen surplus associated with agriculture production. Reforming the most-distorting agriculture support policies would contribute to that effort. Regional agri-environmental programmes should be scaled up and complemented by policies and regulations targeted towards better environmental performance, potentially as part of the policy on ecologically sustainable agriculture.

Figure 15.1. Israel: Development of support to agriculture

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

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Statlink

Figure 15.2. Israel: Drivers of the change in PSE, 2019 to 2020

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Statlink

Figure 15.3. Israel: Transfer to specific commodities (SCT), 2018-20

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Statlink

Table 15.1. Israel: Estimates of support to agriculture

Million USD

	2000-02	2018-20	2018	2019	2020p
Total value of production (at farm gate)	3 337	8 678	8 461	8 639	8 933
of which: share of MPS commodities (%)	55.3	54.7	54.6	53.2	56.4
Total value of consumption (at farm gate)	3 666	11 361	11 344	11 023	11 716
Producer Support Estimate (PSE)	681	1 629	1 442	1 485	1 961
Support based on commodity output	486	1 421	1 214	1 298	1 751
Market Price Support1	476	1 405	1 197	1 282	1 735
Positive Market Price Support	490	1 406	1 199	1 283	1 736
Negative Market Price Support	-14	-1	-2	-1	-1
Payments based on output	10	16	17	16	16
Payments based on input use	160	113	116	110	112
Based on variable input use	106	81	84	79	82
with input constraints	0	0	0	0	0
Based on fixed capital formation	42	17	17	18	16
with input constraints	0	0	0	0	0
Based on on-farm services	12	14	15	14	14
with input constraints	0	0	0	0	0
Payments based on current A/An/R/I, production required	25	87	97	72	91
Based on Receipts / Income	21	67	77	52	73
Based on Area planted / Animal numbers	4	19	20	20	18
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	14	5	7
With variable payment rates	5	9	14	5	7
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 (%)	19.0	18.3	16.6	16.8	21.4
Producer NPC (coeff.)	1.18	1.20	1.17	1.18	1.25
Producer NAC (coeff.)	1.24	1.22	1.20	1.20	1.27
General Services Support Estimate (GSSE)	100	258	226	245	304
Agricultural knowledge and innovation system	51	105	99	106	109
Inspection and control	16	26	24	25	29
Development and maintenance of infrastructure	10	107	82	96	143
Marketing and promotion	11	1	1	1	2
Cost of public stockholding	12	11	11	9	12
Miscellaneous	0	8	8	7	9
Percentage GSSE (% of TSE)	12.9	13.7	13.5	14.1	13.4
Consumer Support Estimate (CSE)	-613	-1 976	-2 008	-1 688	-2 231
Transfers to producers from consumers	-446	-1 372	-1 199	-1 247	-1 669
Other transfers from consumers	-172	-607	-813	-443	-565
Transfers to consumers from taxpayers	0	0	0	0	0
Excess feed cost	5	3	4	3	3
Percentage CSE (%)	-16.5	-17.4	-17.7	-15.3	-19.0
Consumer NPC (coeff.)	1.20	1.21	1.22	1.18	1.24
Consumer NAC (coeff.)	1.20	1.21	1.22	1.18	1.24
Total Support Estimate (TSE)	781	1 887	1 668	1 729	2 265
Transfers from consumers	618	1 979	2 012	1 691	2 234
Transfers from taxpayers	335	516	468	482	596
Budget revenues	-172	-607	-813	-443	-565
Percentage TSE (% of GDP)	0.6	0.5	0.5	0.4	0.6
Total Budgetary Support Estimate (TBSE)	305	482	470	447	530
Percentage TBSE (% of GDP)	0.2	0.1	0.1	0.1	0.1
GDP deflator (2000-02=100)	100	137	134	137	138
Exchange rate (national currency per USD)	4.34	3.53	3.60	3.56	3.44

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, peanuts, tomatoes, peppers, potatoes, avocados, bananas, oranges, grapefruit, grapes, apples, milk, beef and veal, sheep meat, poultry and eggs.

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Description of policy developments

Overview of policy trends

Agriculture was a priority for the state of Israel during its early years for three main reasons. First, the state needed to settle undeveloped areas of the country for geopolitical security. Second it wanted to avoid food shortages, due in part to an inability to import agricultural products from surrounding countries. Third, it needed to provide employment and livelihood for new immigrants to Israel (OECD, 2010[1]). Its objectives are still to improve food supply and achieve self-sufficiency in agricultural products that can be produced locally, expand existing export markets, and maintain the rural population, particularly in the peripheral areas as part of the settlement policy.

Over the past thirty years, Israel 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. Major reforms in the agricultural sector began in the early 1990s with trade and market reforms limiting the role of the state in agricultural markets, including in central planning, consumer prices, and export and import policies for specific commodities. Reforms continued into the 2000s with a focus on competitiveness and gradual efforts to limit interventions in the dairy and beef sectors. Despite these, the country continues to support its agriculture with price controls, import tariffs and payments to farmers. (Table 15.2).

Table 15.2. Israel: Agricultural policy trends

Period	Broader framework	Changes in agricultural policies
1985-1990	Trade liberalisation General economic reforms	Economic stabilisation programme Privatisation of state-owned enterprises Dismantling of state grain trading (imports) agency Dismantling of regional co-operatives Debt restructuring and write offs Fruit and vegetable production quotas abolished
1991-1994	Market and trade reforms (export liberalisation)	Gradual abolition of state monopoly of fruits and vegetables exports State meat trading replaced with the Kosher Meat Import Law Consumer price controls removed (except milk, eggs and flour) Reform of agricultural production and marketing boards (diminishing functions) Changes in water pricing Uruguay Round Agricultural Agreement
1995-1999	Trade reforms (import liberalisation)	Non-tariff barriers removed and ceiling binding Broiler sector reformed Reduction of 40% of fresh water use for agriculture FTAs signed
2000- 2010	Focus on competitiveness	Foreign exchange controls abolished Dairy sector reform Abolished minimum prices and surplus removal for fruit and vegetables Abolition of broiler production quotas Farmers’ agreement on water charges and water supplies FTAs signed
2010-present	Continued efforts to reform key sectors	Reform agreement in the beef sector opening import quotas Dairy sector planning law 2011, dairy and eggs reforms discussed Measures to improve the agriculture marketing systems Water price reforms for equity reasons FTAs signed

Over the last 20 years, trends in producer support in Israel, expressed as percentage of gross farm receipts, encompassed three main phases: (1) a steady reduction until the food crisis of 2007-08; (2) a rapid rebound in support with this crisis, leading to a plateau in 2008-11; then (3) a fall and new increase in support since 2012. Fluctuations in agricultural support are largely attributable to market price support (and to input support early-on), as budgetary support to producers remained stable. The market price support results largely from guaranteed minimum prices and import tariffs, while budgetary support is mostly provided based on current production and input use (Figure 15.4).

Figure 15.4. Israel: Level and PSE composition by support categories, 1995 to 2020

As a percentage of gross farm receipts

Note: A/An/R/I: Area planted/Animal numbers/Receipts/Income.

Payments not requiring production include Payments based on non-current A/An/R/I (production not required) and Payment based on non-commodity criteria. Other payments include Payments based on non-current A/An/R/I (production required) and Miscellaneous payments.

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Main policy instruments

The government is involved in allocating key factors of production, including land, water and foreign labour. 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 are supported by guaranteed prices and production quotas. Guaranteed prices for milk are based on the average cost of production and, while 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 maximum retail prices, are applied together with border protection 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 eggs, and encompassing a mixture of payments decoupled from production and output payments for poultry producers (OECD, 2010[1]).

Capital grants provide support to investments. Farmers who participate in the investment support scheme also receive income tax exemptions and accelerated depreciation. Since 2009, an investment support programme was implemented to partly replace foreign workers in the agricultural sector, but budgetary allocations for this programme declined strongly in recent years.

The Insurance Fund for Natural Risks in Agriculture (Kanat) provides subsidised insurance schemes. The share of 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 is applied to rain-fed crops to protect against a loss of revenue caused by price falls, low yields or both.

In 2015, a credit fund launched with the goal of establishing or expanding small farms that specialise in crop production. The government serves as the guarantor for bank loans with an 85% guarantee to ensure that 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 agro-food products remains an important tool to support agricultural producers. Israel’s average applied Most Favoured Nation (MFN) tariff on agricultural goods (WTO definition) amounted to 19.1% in 2018, down from 27.7% in 2012, still much higher than the 3% average for non-agricultural goods (WTO, 2018[2]). Israel has tariff rate quotas (TRQ) 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 over 500 preferential TRQs for agricultural goods.1

Despite reforms that began in 2014, Israel’s tariff profile for agricultural products remains uneven, with very 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 complicated, involving specific, compound or mixed duties (WTO, 2018[2]); in 2019, 21.1% of imported agricultural products were subjected to non-ad-valorem rates, compared to 3.6% for all goods (OECD, 2019[3]). At the same time, some 50.6% of agriculture imports entered Israel duty-free, mostly through MFN access and preferential agreements (notably with the European Union and the United States) (OECD, 2019[3]). With the exception of beef, poultry (including turkey), and mutton and products thereof, there is no legal requirement that imported food and agricultural products be kosher, although imported, non-kosher agro-food products are rarely accepted by local marketing channels.

Budgetary allocations for research and development regularly increase and account for over 20% of the total agriculture-related budget in recent years. During 2018-20, ILS 366 million (USD 104 million) were allocated annually to agriculture research and development, of which almost ILS 84 million (USD 24 million) were used for a competitive research fund. Together with effective transmission of innovation to the farm level through a public extension service, this allowed Israel to become a world leader in agricultural technology, particularly for farming in arid and desert conditions.

Israel has no sector-specific mitigation policy for GHG mitigation in agriculture because agriculture accounts for a limited share of the country’s total greenhouse gas emissions (2.7% in 2018). However, the government introduced and applied a number of programmes to support climate change adaptation. In addition to its forward-looking water resource management – in which irrigation relies on recycled wastewater and desalinated water, flexible quotas, and irrigation charges – the government supports research and development of improved agronomic practices, breeding, soil conservation and efficient use of resources. The programme also 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[3]).

Domestic policy developments in 2020-21

A parliamentary election, which was the third in less than a year, and unsuccessful negotiations on the state budget put on hold any substantial changes in agriculture and food government policies. Nevertheless, ongoing projects continued, some even extended and ad-hoc solutions to cope with the COVID-19 crisis were implemented.

Despite a large number of discussion, no consensus was reached on the next phase following the 2011 Dairy Sector Planning Law. 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, and 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. Instead, and accounting for 2020 circumstances, the current law has been extended until mid-2021. Discussions will continue, in order to find a solution that will be accepted by all parties.

A law memorandum on Fruit and Vegetable Marketing Standards (related to “the Law for Inspection of Plant Production and Marketing – 2011”) was published for a second time in view of gathering public comments. The 2011 Law was found to be unable to delineate authorities of the relevant bodies, and did not provide authority on implementing regulations to enable the traceability of fresh agriculture products. While waiting for the law to be amended and for regulations to be introduced, the Ministry of Agriculture and Rural Development (MARD) called on retailers to separate food products by sources and label their country of origin, even for produce sold loose (which are not legally required to be labelled as such). The majority of the retailers responded to this request and started voluntary labelling fresh produce sold loose.

In mid-2020 a tender was published for a contractor to develop fruits and vegetables quality standard brochures and an internet application. The quality standard brochures present most of the quality parameters typical to fruits and vegetables using images, in accordance to different degrees of damage and in accordance with the various quality definitions. The internet application will facilitate the development of quality brochures and ease the inspection of fresh agricultural produce, using Automatic Quality Control and a cloud-based data analytics platform (artificial intelligence) for the Fresh Produce industry. The application will not be used mandatorily under the Standardization Law, but will be an integral tool for determining quality standards.

The Veterinary Inspection Corporation, a legal entity, owned by the government, started to operate in March 2020. It was established for hired publically accredited veterinarians and inspectors to conduct a number of public services. This encompasses conducting inspection at plants that process animal food, including slaughterhouses and meat processing plants as well as at points of sale and food supply sources. The Corporation employs 380 workers, including 250 veterinarians, with the remaining employees working as inspectors at slaughterhouses, with an annual turnover of ILS 160 million (USD 46 million). Activities are funded by charging fees from the plants at which it provides veterinary supervision. The fees are approved and regulated as specified by the Israeli Knesset (Parliament). Its activities are framed by regulations prescribed by officials at the Ministry of Health and by MARD. In addition, it operates as a licensed business which helps minimise its costs as much as possible, in relation to the charges that it is authorised to collect. All veterinarians and inspectors engaged in activities of the Corporation are operating under regulators at the Ministries of Health and Agriculture, who determine inspection rates for each slaughterhouse as well as the inspectors expected workloads.

In 2020, MARD began forging an updated policy for the implementation of ecologically sustainable agriculture. A designated committee was appointed by MARD’s DG. The committee defined the overall vision and began working with dedicated task teams on four priority action areas: agricultural wastes (organic and inorganic); pesticides and plant protection; the effect of agriculture on rural infrastructure and local communities; the effects of agriculture on soil and water. The four teams will identify objectives and offer recommendations for action, which will be assessed by policy makers in 2021. A comprehensive strategic plan is being developed on the basis of these recommendations, whose implementation will depend on available resources pending approval of the Budget Law.

MARD reached an agreement with the Israel Land Authority allocating ILS 21 million (USD 6 million) for each of the next three years for the implementation of sustainable eco-friendly farming practices for soil conservation, enabling the agricultural sector to take a significant part in the global effort for greenhouse gas reduction. This agreement follows a survey conducted by MARD finding that 13% of the cultivated farmlands in Israel were farmed by soil conserving practices, which is similar to the worldwide average.

On climate change adaptation, MARD, in co-operation with the Israel Meteorological Service (IMS), has advanced in the development of databases associated with the 54 identified critical climatic indices relevant to agricultural activities. Activities undertaken included the control and homogenisation of climatic data (temperatures, precipitation, and humidity in the last 30 to 70 years); performing the quality control of climatic model datasets according to different climate change scenarios (temperature, precipitation, humidity until 2050); and the calculation of daily and hourly indices based on past measurements and future projections using the above datasets. The collected data are beginning to be used to assess the main agricultural implications of climate change in the agriculture sector, encompassing risks and potential opportunities for diverse agricultural activities. In 2020, the quantitative analysis of climate change implications on dairy production and energy expenditure by 2050 have been initiated, and a mapping exercise predicted regions for growing deciduous trees by 2050 based on chill hour requirements.

Four regional agri-environment schemes are approaching the mid-point of their 5-year budget allowance (ILS 1.5 million- USD 0.4 million) as outlined in Table 15.3. The four schemes aim at co-ordinating plant protection based on integrated pest management (IPM) or integrated crop management, reducing conflicts between agriculture and wildlife and enhancing ecosystem services. A conference was organised to discuss progress made thus far. The Megiddo and Negev Mountain schemes have been instrumental in initialising co-operative processes with farmers of the region. All schemes targeted better communication between all stakeholders within the region to achieve sustainable agriculture goals. The government intends to renew the schemes beyond 2022 and expand the regional agri-environment schemes in the future.

Table 15.3. Regional agri-environmental schemes

Region	Co-ordinator	Area under IPM (hectares)	Main objectives
West Negev mountain	Regional council	Small scale pilot – about 100	IPM, control of invasive alien species, re-use of abandoned greenhouses
Hefer Valley	Regional council	630	IPM, agro-ecological services
Binyamina Farmers	Local farmer association	590	IPM, agro-ecological services, conflicts with wildlife
Megiddo	Regional council	600	IPM, agro-ecological services, conflicts with hikers

Source: MARD.

Water supply and allocation decisions for the sector continued to adapt to fluctuations in precipitation. In 2020, Israel’s annual precipitation rate continued to exceed the multi-annual average. The Sea of Galilee reached its maximum level (the last time this occurred was in 2004), salinity decreased and water quality improved. Water supply in northern rivers remained high during the summer months and aquifer levels rose. Due to this, there was a decrease in the amount of water supplied by desalination plants. However, 2021 forecast estimates that total precipitation will only be 80% of the multi-annual average quantity. Consequently, water allocations for 2021 have remained at the 2020 level (without the special, one-time allocation due to COVID-19). It should be noted that, with the exception of the Galilee region, all remaining consumers will receive their full allocation at the beginning of the year, regardless of quantities of rain. In the Galilee and the Golan, special attention will be paid to rain levels and, once the total volume is known, only then will the full water allocation for those regions be approved.

Water infrastructure investments continue to progress. The plan to connect remote regions to the national water system by connecting the Sea of Galilee to the national water system is progressing. Some of the infrastructure has already been constructed, and a number of alternatives are considered for the future. The Sorek Desalination Plant is being developed, while the location of the new desalination plant in the Western Galilee was decided and the tender process is underway.

During 2020, water prices did not increase ‑ staying at ILS 1.54/m³ (USD 0.44/m³) for consumers of the national company Mekorot in areas lacking alternative water sources and at ILS 1.84/m³ (USD 0.53/m³) for the rest of the country ‑ no increase is expected for 2021, in accordance with the 2018 Farmers’ Agreement, which will end in July 2022. Support for peatland farmers will continue in 2021. Financial support continued to be allocated to private producers in the Hula Valley area to ensure that the peatlands are irrigated for ecological reasons and will continue to be provided in 2021.

In 2017, 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 for ILS 18 million (USD 5.2 million) per year to be saved over four years (2018-22) to double2 the savings of farmers deciding not to cultivate their land. According to the procedure, interested farmers are required to submit requests to stop activity and establish saving accounts, which the State will double. As of end 2020, more than 600 Sabbatical requests had been submitted and more were being processed, exceeding the government’s initial budget. A proposed additional budget of ILS 125.5 million (USD 36 million) was made by the government in 2020, pending the 2020 budget approval.3

Domestic policy responses to the COVID-19 pandemic

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) have been considered essential and are therefore excluded from these regulations.

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, 35% of employees were originally considered essential, a proportion that declined to 20% in early 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 worked with the Water Authority to increase the water quota for agriculture, so local food production could guarantee fresh agricultural products supplies for Israel population during the crisis. The Water Authority board approved an increase in the maximum quota for agricultural purposes in several regions. In total, an additional 71 million m³ were authorised for agricultural use, including 20 million m³ for the Upper Galilee and 20 million m³ for the Sea of Galilee area (Sovev Kineret). The remaining 31 million m³ was divided equally amongst all water using farmers.

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 requested and obtained from the Population Authority the extension of work visa to Thai workers whose visas expired their maximum five years and 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. Furthermore, MARD participated in funding non-profit organisations that coordinated the engagement of volunteers during the first COVID-19 wave (March 18-June 30) at a budget of ILS 12 million (USD 3.5 million). Thanks to these efforts, and due to the interest in leaving lockdown for open air, and to the role of youth community groups, a significant increase in volunteers in agriculture was recorded during the crisis. In particular, about 12 000 volunteers participated in 87 000 workdays on farms during the first COVID-19 wave.

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.

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[4]).

To improve food resilience and for the purpose of contending with the economic effects on farmers associated with COVID-19, an Acceleration Plan is being developed, aimed at promoting agriculture in Israel, by dedicating efforts and budgets to a range of fields. This includes: agriculture R&D funding, capital investments in precision agriculture and yield improvement technologies, the development of and investments in vertical agriculture, the building of central and regional markets, the development of digital trade areas to improve competition, infrastructure improvements in peripheral villages, soil preparation and improvement in the Arava region, agricultural water networks rehabilitation in the villages, converting rainfed areas into irrigated areas, and building regional reservoirs for catching marginal water, flood water, effluents, etc.

Trade policy developments in 2020-21

Amendments to the Free Export Order were published in May 2020 in order to reduce the regulatory burden, facilitate the export procedure and to regulate the export of Medical Cannabis.

The revised free trade agreement (FTA) with EFTA, signed in 2018, has yet to be ratified. The FTA with Ukraine signed in 2019 and a United Kingdom-Israel Free Trade Agreement, as well as a related protocol for the mutual recognition of organic produce, entered into force on 1 January 2021. The FTA with Colombia signed in 2013 and the FTA with Panama signed in 2018 were ratified in 2020 and their concessions started to apply. Negotiations on new FTAs with the Republic of Korea, the People’s Republic of China, Viet Nam, the Eurasian Economic Union (EAEU) and Guatemala are at varying stages of progress. A revised FTA with MERCOSUR is under negotiation.

The normalisation agreements (known as “Abraham Accords”) that were signed in the second half of 2020, followed by Memorandums of Understanding on, inter alia, promoting bilateral agricultural trade —especially with the United Arab Emirates and Bahrain— have a high potential for developing intensive trade flow of fresh produce.

Trade policy responses to the COVID-19 pandemic

During the lockdown period, MARD conducted daily assessments of the supply situation of fresh agricultural produce, to identify missing items and allow their importation when needed. In particular, a marked shortage of some basic consumer products, such as eggs and certain canned and other preserved goods was observed during March – April 2020. As a response, MARD put in place incentives to encourage imports of these products as quickly as possible and used different import channels in order to compensate for the shortage. For example, WTO quotas were 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 copies of original phytosanitary or health certificates for specific products and under certain conditions.

An aid package was provided by MARD together with the Ministry of Finance for agriculture activities affected by export constraints. This includes fresh produce affected by declining air transportation, caused by travel restrictions, and produce affected by the closing of the Flower and Plant Auction in the Netherlands, cancellation of orders from global markets in addition to niche product for local markets. The package aims to assist growers of fresh agriculture produce and fresh herbs for export and the local market in the ornamental industry. The aid is provided for crops sold fresh and is based on the sales gap between this year and a reference period. A participation coefficient, calculated for each grower according to estimated economic damages (difference in turnover minus COVID-19 aid grants) is used as a weighting factor so growers that were mostly affected will receive a higher rate of assistance. The total aid is restricted to maximum ILS 0.6 million (USD 0.17 million) per applicant and is only offered once..

Contextual information

Israel’s economy is relatively small but has been growing rapidly and its GDP per capita more than 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.

Table 15.4. Israel: Contextual indicators

	Israel		International comparison
	2000*	2019*	2000*	2019*
Economic context			Share in total of all countries
GDP (billion USD in PPPs)	157	382	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	415	53	63
GDP per capita (USD in PPPs)	24 938	42 160	9 265	21 975
Trade as % of GDP	25	17	12.3	14.6
Agriculture in the economy			All countries1
Agriculture in GDP (%)	1.4	1.2	2.9	3.5
Agriculture share in employment (%)	2.2	0.9	-	-
Agro-food exports (% of total exports)	3.1	3.8	6.2	7.3
Agro-food imports (% of total imports)	5.3	8.1	5.5	6.7
Characteristics of the agricultural sector			All countries1
Crop in total agricultural production (%)	58	60	-	-
Livestock in total agricultural production (%)	42	40	-	-
Share of arable land in AA (%)	60	62	32	34

Notes: *or closest available year.

1. Average of all countries covered in this report.

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

Figure 15.5. Israel: Main economic indicators, 2000 to 2020

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

Israel has maintained a highly performing economy among OECD countries, with robust GDP growth until 2019, exceeding 3% per year and close to full employment in 2018-19. Its economy contracted in 2020 due to the COVID-19 pandemic and associated lockdown measures, but unemployment remained relatively low. At the same time inflation fluctuated around zero from 2017-20 (Figure 15.5).

The agriculture trade balance of Israel continued to decline in 2019, with the value of imports of mostly processed food products exceeding the value of exports of mainly primary commodities (Figure 15.6). This gradual shift may partly reflect the relative appreciation of the Israeli currency compared to the US dollar and the Euro since 2015.

Figure 15.6. 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 (Figure 15.7).

Figure 15.7. 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.

While agriculture’s water resource use has improved, the environmental performance of Israel’s agriculture has degraded since 2000. During 2000-19, despite a 55% increase in irrigation area, agriculture’s share of freshwater abstraction has halved, largely due to changes in water management, encompassing the use of other water resources, efficient irrigation technologies and rigorous water demand policies. At the same time, nutrient surpluses have grown significantly, with nitrogen balances increasing by 25% to reach a level eight times the OECD average levels (Table 15.5).

Table 15.5. 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*	2019*	2000*	2019*
Nitrogen balance, kg/ha	188.8	236.2	33.2	28.9
Phosphorus balance, kg/ha	65.7	68.9	3.4	2.6
Agriculture share of total energy use (%)	1.2	1.6	1.7	2.0
Agriculture share of GHG emissions (%)	3.3	2.8	8.4	9.5
Share of irrigated land in AA (%)	43.4	67.3	-	-
Share of agriculture in water abstractions (%)¹	64.0	35.9	46.0	43.4
Water stress indicator	61.0	39.3	9.3	8.5

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.

References

[4] 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.

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

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

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

Notes

← 1.  Including the Ukrainian and British TRQs approved as part of their respective FTAs with Israel.

← 2.  Or triple in the case of a few crops.

← 3.  Of note, the majority of farmers’ acts according to the Jewish law solution of a sale permit (in the Sabbatical year the land “is sold” symbolically to whoever is not Jewish and thus it can be farmed on similar to a normal year). The Chief Rabbinate Office will handle the sale permit in the coming Sabbatical year and its cost is estimated at ILS 8 million (USD 2.3 million).