Agricultural Policy Monitoring and Evaluation 2023

16. Israel

Support to agriculture

The share of producer support in gross farm receipts (Producer Support Estimate, PSE) amounted to 13.5% in 2020-22, under the OECD average and below the 2000-02 level of 19%, but above levels seen in the early 2010s. At the same time, the 89% share of potentially most-distorting forms of support remained twice as high as 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, even though some are in the process of gradual reform. Poultry producers benefit from the largest share of market price support, accounting for 45% of the total producer support in 2020-22.

Single Commodity Transfers (SCT) represented 84% of the PSE in 2020-22. Market price support is the main component of SCT: poultry, tomatoes, apples, eggs, and grapes have the highest share of SCT in commodity gross farm receipts.

The share of the General Services Support Estimate (GSSE) in total support amounted to 2.9% of the value of the agriculture production in 2020-22, slightly below the OECD average, and just under the proportion in 2000-02. These expenditures focused mostly on hydrological infrastructure and agricultural innovation. The Total Support Estimate (TSE) amounted to 0.3% of Gross Domestic Product (GDP) in 2020-22, half the share of the OECD average.

Recent policy changes

The government approved tariff cuts on a wide range of fruits, vegetables, and agricultural inputs starting in 2022. This follows Decision no. 213 of August 2021, which aimed to reduce customs duties on fresh produce and to ease phytosanitary import restrictions while proposing direct payments to farmers and support for investment and innovation in agriculture. Other elements of the decision are on hold pending the new government’s position.

Important sector reforms were finalised for egg, dairy, and beef production. In the case of eggs, the reform sets up the progressive elimination of production quotas by 2033, and halves existing tariffs. A second new dairy agreement postpones the change of the target price mechanism to 2025, reduces the expected increase in the price of milk, and lowers custom duties for specific cheeses. The beef sector agreement eliminates the import tariff on chilled beef, with direct payments offered to producers in compensation along with investment in domestic branding of beef products.

In response to the Russian war of aggression in Ukraine, Israel sought alternative suppliers of wheat, and extended the duration of marketing of imported eggs in 2022.

The Free Trade Agreement with Korea entered into force in 2022. Israel also introduced electronic phytosanitary certificates for fresh herbs and cut flowers exported from Israel to the European Union (EU), and a computerised system for the management of plant imports.

Assessment and recommendations

• Israel made some important steps to assist the agricultural sector in adapting to climate change, including by setting up an inter-ministerial government plan, conducting an in-depth climate-change-impact assessment, research and development efforts, and adjusted insurance systems. Continued efforts in co-ordination with farmers will be required to facilitate their transformative adaptation to more volatile climatic conditions.

• Water management has long been a priority and will continue to play a central role for Israel to adapt to extreme water risks in a changing climate. Israel should maintain its investment path towards alternative water sources (treated wastewater and desalinated water) and continue to improve its water policies. A new Farmer Agreement should be pursued to ensure that producers contribute appropriately to their improved water security by charging water prices in line with the marginal costs of supplying water. The government could also facilitate water trading among irrigating farmers and other water users and compensate farmers not using their entire water quotas in severely dry years.

• Israel accelerated its reforms of agricultural support in several sectors in 2022, covering selected dairy and meat products, fruits, and vegetables. While the 2022 decline in market-distorting support can be attributed mostly to international market conditions, implementing these reforms will limit pressures on food prices and potentially on the environment.

• Several commodities remain subject to high levels of border protection. Israel maintains high tariffs for goods such as poultry meat, sheep meat, and certain fruits and vegetables. These tariffs could be gradually removed and replaced by decoupled temporary payments on a transitional basis. The tariff system for agriculture should also be simplified, avoiding non-ad-valorem tariffs.

• Expenditure on agricultural knowledge and innovation systems recovered in 2022 after two years of decline and should continue to grow to improve the sector’s productivity and environmental performance. Limited production growth from 2011 to 2020 was driven by rising input use rather than innovation, as measured by Total Factor Productivity (TFP), which is not sustainable in the long term. Additional funding could be made available by redirecting market-distorting subsidies – which amounted to about ILS 334 million (USD 100 million) annually during 2020-22 – towards agriculture knowledge and information systems for sustainable productivity growth.

• The government should build on recent initiatives to limit the sector’s greenhouse-gas (GHG) emissions and the very high and rising nitrogen surplus associated with agriculture production. Adopting a target for GHG emissions in the sector could ignite more mitigation efforts, including for methane emissions generated by livestock. Regional agri-environmental programmes should be scaled up and complemented by targeted policies and regulations that incentivise better environmental performance, particularly in the case of nitrogen emissions. Research and development (R&D), and agriculture extension activities should encourage sustainable productivity improvements. Continuing reforms of support for animal production would also help.

Figure 16.1. Israel: Development of support to agriculture

 

 

 

 

 

Source: OECD (2023), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Figure 16.2. Israel: Drivers of the change in PSE, 2021 to 2022

Note: % change of nominal Producer Support Estimate expressed in national currency. The producer price change and the border price change are not calculated when both negative and positive market price support (MPS) occur at the commodity level for the previous year. Note that negative MPS estimates for livestock products may arise in cases of aligned product prices if there is positive MPS for feed commodities.

Source: OECD (2023), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Figure 16.3. Israel: Commodity-specific transfers as a percentage of commodity gross farm receipts, 2020-22

Source: OECD (2023), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Table 16.1. Israel: Estimates of support to agriculture

Million USD

	2000-02	2020-22	2020	2021	2022p
Total value of production (at farm gate)	3 337	9 573	8 956	10 018	9 744
of which: share of MPS commodities (%)	58.28	58.84	57.51	58.07	60.94
Total value of consumption (at farm gate)	3 635	11 904	11 164	12 873	11 675
Producer Support Estimate (PSE)	680	1 324	1 388	1 612	973
Support based on commodity output	485	1 101	1 178	1 382	744
Market Price Support1	475	1 084	1 162	1 364	726
Positive Market Price Support	489	1 087	1 163	1 365	734
Negative Market Price Support	-14	-3	0	-1	-7
Payments based on output	10	17	16	19	17
Payments based on input use	160	115	112	126	106
Based on variable input use	106	83	82	96	70
with input constraints	0	0	0	0	0
Based on fixed capital formation	42	13	16	11	13
with input constraints	0	0	0	0	0
Based on on-farm services	12	19	14	18	23
with input constraints	0	0	0	0	0
Payments based on current A/An/R/I, production required	25	101	91	97	116
Based on Receipts / Income	21	81	73	78	93
Based on Area planted / Animal numbers	4	20	18	19	23
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	7	7	7	7
With variable payment rates	5	7	7	7	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 (%)	19.02	13.48	15.12	15.70	9.74
Producer NPC (coeff.)	1.18	1.13	1.15	1.16	1.09
Producer NAC (coeff.)	1.23	1.16	1.18	1.19	1.11
General Services Support Estimate (GSSE)	100	281	304	272	267
Agricultural knowledge and innovation system	51	108	109	103	113
Inspection and control	16	29	29	25	33
Development and maintenance of infrastructure	10	122	143	121	102
Marketing and promotion	11	1	2	1	1
Cost of public stockholding	12	11	12	11	11
Miscellaneous	0	9	9	11	8
Percentage GSSE (% of TSE)	12.96	17.55	17.96	14.42	21.56
Consumer Support Estimate (CSE)	-612	-1 562	-1 493	-2 086	-1 106
Transfers to producers from consumers	-446	-1 100	-1 171	-1 386	-743
Other transfers from consumers	-172	-466	-324	-705	-369
Transfers to consumers from taxpayers	0	0	0	0	0
Excess feed cost	5	4	2	5	5
Percentage CSE (%)	-16.60	-13.08	-13.37	-16.21	-9.48
Consumer NPC (coeff.)	1.20	1.15	1.15	1.19	1.11
Consumer NAC (coeff.)	1.20	1.15	1.15	1.19	1.10
Total Support Estimate (TSE)	781	1 605	1 692	1 884	1 240
Transfers from consumers	617	1 566	1 495	2 091	1 112
Transfers from taxpayers	335	505	521	497	497
Budget revenues	-172	-466	-324	-705	-369
Percentage TSE (% of GDP)	0.59	0.34	0.41	0.39	0.24
Total Budgetary Support Estimate (TBSE)	305	521	530	520	514
Percentage TBSE (% of GDP)	0.23	0.11	0.13	0.11	0.10
GDP deflator (2000-02=100)	100	134	131	133	139
Exchange rate (national currency per USD)	4.34	3.34	3.44	3.23	3.36

Note: p: provisional. NPC: Nominal Protection Coefficient. NAC: Nominal Assistance Coefficient. A/An/R/I: Area planted/Animal numbers/Receipts/Income. 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, carrots, easy peelers, dates, milk, beef and veal, sheep meat, poultry and eggs.

Source: OECD (2023), “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 policy in Israel during its early years was driven by three main factors. 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 livelihoods for new immigrants to Israel (OECD, 2010[1]). Its objectives are still to improve food supply and self-sufficiency in agricultural products that can be produced locally, expand existing export markets, and maintain the rural population, particularly in the peripheral areas.

Over the past 30 years, Israel has reformed the way it provides subsidies, reduced central planning of agricultural industries, and changed the way production quotas, price controls and import protection are implemented. Major reforms in the agricultural sector began in the early 1990s with trade and market reforms to limit the role of the state in agricultural markets. Reforms continued into the 2000s with a focus on competitiveness and gradual efforts to limit interventions in the dairy and beef sectors. Over the course of 2021 and 2022 the government renewed its impetus to reform in order to lower food prices. In particular, in March 2022, a schedule of price reduction was approved for selected fruits and vegetables, in parallel to agreements on egg, dairy and beef (Table 16.2).

Table 16.2. 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
2010-2022	Continued efforts to reform key sectors	Reform agreement in the beef sector opening import quotas Dairy sector planning law 2011, second dairy agreement in 2022 Egg sector agreement and reform Measures to improve the agriculture marketing systems Water price reforms for equity reasons Tariff reductions for specific fruits and vegetables FTAs signed, use of electronic instruments to facilitate import inspections

Over the last 20 years, the trend in producer support in Israel, expressed as percentage of gross farm receipts, unrolled in four main phases: (1) a steady reduction until the food crisis of 2007-08; (2) a rapid rebound in support after this crisis, leading to a plateau in 2008-11; then (3) a fall and new increase in support from 2012-16; and (4) fluctuating levels since 2016. Fluctuations in agricultural support are largely attributable to market price support (and to input support early-on), as budgetary support to producers remained relatively 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 Stronger increase in world prices than in domestic prices and the initial effects of gradual market-oriented reforms contributed to significantly lower total support to agriculture in Israel in 2022 (Figure 16.4).

Figure 16.4. Israel: Level and PSE composition by support categories, 1995 to 2022

Notes: 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 (2023), “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 visa for foreign workers with permits to work in agriculture. Both the overall quota and the allocation of workers to individual farmers are regulated. After adding about 6 000 new visas to be implemented between 2021 and 2023, the total number of foreign worked visas under quotas reached about 31 000 in early 2023. In practice, not all visas are used due to technical issues.

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 Kansas market price, adjusted for quality and transportation costs. Egg production quotas and recommended prices have been applied together with border protection as an instrument to provide price support to producers and are the basis for calculating maximum retail prices (though the system is under reform). At the same time, consumer price controls are applied for a range of basic food products, including bread, milk and dairy products, and salt. Egg and poultry producers in “peripheral areas” at the northern border receive payments based on output levels for egg producers and encompassing a mixture of payments decoupled from production and output payments for poultry producers (OECD, 2010[1]).

Farmers who participate in the investment support scheme receive capital grants for investments as well as income tax exemptions and accelerated depreciation. Since 2009, an investment support programme has been in place to reduce demand for foreign workers in the agricultural sector, but the budget for this programme has declined in recent years.

The Insurance Fund for Natural Risks in Agriculture (Kanat) provides subsidised insurance schemes. The government covers 80% of the cost of the total insurance premium 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 available for rain-fed wheat and barley to protect against a loss of revenue caused by price falls, low yields or both.

In 2015, a credit fund was launched to help establish or expand small farms that specialise in crop production. The government guarantees 85% of the value of bank loans to ensure that small farms with insufficient collateral can access loans.

Israel’s economy is characterised by a transparent and open trade regime overall. However, border tariff protection on agri-food products remains an important tool to support agricultural producers. Israel’s average applied Most Favoured Nation (MFN) tariff on agricultural goods (WTO definition) was 11.9% in 2021, down from 27.7% in 2012 but higher than the 2.2% average for non-agricultural goods (WTO, ITC and UNCTAD, 2022[2]; WTO, 2019[3]). Israel has WTO tariff rate quotas (TRQs) for wheat, fats and oils, walnuts, prunes, maize, citrus juices, sheep meat and various dairy products (WTO, 2019[3]). 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 250 preferential TRQs for agricultural goods.

Israel’s tariff profile for agricultural products remains uneven. There are high or prohibitive tariffs for goods such as dairy products, eggs, and certain fruits and vegetables (though under reforms), and low or zero tariffs for other commodities such as certain coarse grains, sugar, oilseed, coffee and tea. The tariff system on agriculture is complicated, involving specific, compound or mixed duties (WTO, 2019[3]); in 2021, 17% of imported agricultural products were subjected to non-ad valorem rates, compared to around 3% for all goods (WTO, ITC and UNCTAD, 2022[2]). At the same time, half of agriculture imports entered Israel duty-free, mostly through MFN access and preferential agreements (notably with the European Union and the United States). With the exception of beef, poultry, and mutton, and products thereof, there is no legal requirement that imported food and agricultural products be kosher, although imported, non-kosher products are rarely accepted by local marketing chains.

Budgetary allocations for research and development account for over 20% of the agricultural budget in recent years. During 2020-22, ILS 358 million (USD 107 million) was allocated annually to agriculture research and development, of which ILS 70 million (USD 21 million) was 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.

While it has been actively supporting climate change adaptation in agriculture (see section below), Israel has no sector-specific target for climate change mitigation in agriculture, which accounts for a limited share of the country’s total GHG emissions (2.6% in 2019). Agriculture does not feature in Israel’s Nationally Determined Contribution or national mitigation plan, and GHG emission reduction potential in Israeli agriculture has yet to be quantified. The government has facilitated the development and adoption of a number of agriculture practices and technical measures to reduce GHG emissions in addition to generating other environmental and economic benefits (OECD, 2022[4]).

Climate change adaptation policies in agriculture

Israel is involved in multiple programmes to support adaptation to climate change. The Ministry of Agriculture and Rural Development (MARD) views the sector as one of the most vulnerable and sees effective adaptation policy as necessary to support a climate-smart and resilient agricultural sector.

Israel’s significant dependence on global and local food systems, and the projected climate-change impacts on regional food availability and food security make climate-readiness relevant for all areas of its food policy. An inter-ministerial committee was established in 2022 to prepare an implementation plan for adapting food systems to climate change, including actions to mitigate climate-change impacts on the agricultural sector and decrease GHG emissions from agricultural activities. The plan was scheduled to be finalised at the beginning of 2023 and presented to the new government.

Efforts to assist farmers in buffering the impact from shocks in the short term

The agricultural insurance scheme has been enlarged to help farmers cope with climate-change risk. As an initial step, agricultural insurance subsidies were increased and are expected to grow further.

The pest-monitoring system was improved and communications with other countries regarding pest vectors were enhanced. Further efforts are ongoing, including R&D and an improved Pest Risk Assessment (PRA) system.

Measures to support incremental changes in the medium term

A climate-change risk and opportunity assessment was initiated to better understand the possible climate-change impacts and the vulnerability of the agricultural sector. The assessment was launched for ten products: wheat, potatoes, carrots, tomatoes, bananas, olives, avocados, apples, citrus, and dairy milk. It includes a survey of the implications of climate change and potential solutions for each product, a literature review, and crop and economic modelling. The complete risk assessment is expected to be completed by January 2024.

A farmers’ climate-smart agriculture toolkit is being developed through two funded research programmes that aim to identify climate-smart practices. These programmes started in 2022 with expected finalisation by 2024.

Efforts to support transformations that create a fundamentally new system in the long term

Research efforts have been engaged in climate-change adaptation. The MARD Chief Scientist established a new research programme on science infrastructure for improved adaptation to climate change. Two multidisciplinary research centres have been established with a view to support adaptation within the National Agriculture Research Organisation (NARO):

• The Center for Agriculture Adaptation under Climate Change has a broad research agenda, covering field crops and vegetables, fruit trees, plant protection, and animal sciences. The Center will also work on climate projections and modelling, and on improving breeding methods towards the development of breeds adapted to climate change. The expected deliverables will include new varieties highly adapted to different environmental stresses, and state-of-the-art technologies and practices for Israeli farmers in a changing Mediterranean climate.

• The Center for Sustainable Agriculture covers five research areas: (1) precision irrigation and fertilisation; (2) biological pest control; (3) soil conservation practices; (4) soil health and carbon sequestration; and (5) GHG mitigation in mixed crop-livestock farming. The centre aims to use innovative technologies (including biotechnology), models, and data and decision-support systems, including artificial intelligence, to progress towards its objectives. These approaches are intended to be adopted alongside more traditional methods, such as reduced tillage, the use of compost, and crop rotation.

At the international level, Israel declared at the end of 2022 its intention to join the UN International Treaty on Plant Genetic Resources for Food and Agriculture (ITPGRFA). Israel joined the OECD Co-operative Research Programme on Sustainable Agricultural and Food Systems (CRP), with effective entry on 1 January 2023.

In addition to climate-change programmes, continued efforts are being undertaken to improve water infrastructure and management so that farming can continue under scarce water conditions. On the water supply side, this includes building desalination plants, extended use of treated wastewater, and canal construction and maintenance, along with investments in precision irrigation by farmers. On the demand side, Israel has a unique water-management system that combines different levers, including annual water quotas and an evolving water pricing system (Gruère, Ashley and Cadilhon, 2018[5]; OECD, 2021[6]).

Domestic policy developments in 2022-23

Overall policy reforms

Actions are underway to implement the August 2021 Decision 213 “Increasing competition in agriculture and streamlining regulation processes in the field of imports”, which aims to reduce custom duties on agricultural fresh produce and to ease phytosanitary import restrictions, while at the same time proposing direct payments to farmers and support for investment and innovation in agriculture (OECD, 2022[4]).

The schedule for the reduction of custom duties was published and implemented as of March 2022 (Customs Tariff Order, 16.3.2022). Custom duties were abolished with immediate effect for certain vegetables and fruits (e.g. garlic, pineapple, avocado, mango) and agricultural inputs (plant propagation material, fertilisers and pesticides). Custom duties for selected additional fruit and vegetables will be decreasing gradually over a 5-year period to 10% of their January 2022 levels. The custom duties for eight other major vegetables and fruits will also be lowered over time, but to a lesser extent (Table 16.3).

Table 16.3. Scheduled reduced custom duties on specific vegetables and fruits

Proportion of custom duty applied compared to the January 2022 rate

	20221	2023	2024	2025	2026	From 2027
Potatoes	85%	75%	65%	55%	50%	50%
Carrots	85%	75%	65%	55%	45%	45%
Onions	85%	70%	60%	50%	40%	40%
Sweet potatoes	85%	70%	60%	50%	40%	40%
Capsicum	85%	70%	60%	50%	40%	40%
Tomatoes	85%	70%	60%	50%	40%	30%
Cucumbers	85%	70%	60%	50%	40%	30%
Apples	85%	70%	60%	50%	40%	30%

Notes: 1. Reduction applied as of April 2022 compared to the January 2022 tariff rate.

Source: Ministry of Agriculture and Rural Development (MARD).

Following the dissolution of the Knesset in June 2022 and the announcement of a new election in November 2022 the reform process was stalled. The coalition negotiations of the new government led to an agreement that envisages a new reform of the agricultural sector, aiming for the “right balance” between lower consumer prices and strengthening the agricultural sector. Until an agreement is reached on the outline and details of the new reform, the reforms initiated by the previous government are halted (except the above-presented declining custom duties).

Sector specific reforms

In June 2022, an agreement with the egg growers’ organisation was signed and turned into a legislation reforming the egg sector support. The agreement includes abolishing the production quotas within ten years (by 29 June 2033) with an option to extend the period for another three years. During the transition period, the Minister of Agriculture can increase the total egg production quota each year by a maximum of 6% (a larger increase is possible with the permission of the Knesset’s Economic Affairs Committee). At the same time, the government will provide grants of ILS 380 million (USD 113 million) for the construction of chicken coops and ILS 100 million (USD 30 million) to redeem quotas from growers who choose to leave the industry. These quotas will be reallocated in competitive tenders. Quotas allocated in 2022 do not qualify for compensation and cannot be commercialised. In addition, custom duties on eggs were reduced by 50% as of July 2022.

In June 2022, the Knesset’s Education, Culture and Sports Committee approved a regulation that will prohibit housing egg-laying hens in cages starting in 2037. The new regulation also bans cages in any new chicken shed, with immediate effect, and provides for a phased removal of existing cages.

In August 2022, after intensive negotiations of the Ministry of Finance, MARD and Milk producers, the Board of Directors of the Milk Board approved a second new Dairy Agreement complementing the one adopted in 2021. According to this agreement, the target price mechanism remains unchanged until 2025 (instead of 2024 as initially discussed). From May 2023, the update procedure of the controlled consumer prices will be automatic, based on a formula taking into account the development of input prices without the need of minister’s approval. The agreement postpones the price increase and reduces it for consumer price-controlled milk products from 14% to 4.9%. The 2022 agreement also includes custom duty reduction for various cheeses (cheese for spreading, mozzarella, haloumi, gorgonzola, jameed) in addition to those on the 2021 agreed list of tariff reduction.

In June 2022, a new agreement was signed with the beef growers’ association, abolishing the remaining import tariff for chilled beef, parallel to an increase in the annual support for grazing beef growers. The total direct support for beef growers will reach ILS 348 million (USD 104 million) by 2029. In addition, the government supported branding and marketing actions for domestic beef with ILS 5 million (USD 1.5 million) and provided grants to improve the efficiency of beef production (ILS 2 million, USD 0.6 million).

Support for the Jewish Shmita (Sabbatical) Year

The Hebrew year 5782 (September 2021 to September 2022) was a Sabbatical Year. Sabbatical Year (Shmita) is Jewish traditional law, which occurs every seven years. It applies only to the biblical land of Israel and forbids the cultivation of agricultural land for one (Jewish) year, unless under specific circumstances.

MARD allocated ILS 93 million (USD 28 million) for special Shmita grants to about 600 farmers, who declared in advance of the Shmita year (during 2021) their intention to refrain from cultivating their farms during the Shmita year. About one-third of these farms eventually decided to operate their farms, which revoked their right to Shmita grants. The remaining close to 400 farmers received grants after their non-cultivated fields and plantations were inspected during the Shmita year. The majority of the unused budget returned to the treasury. Some Shmita entitlements were enlarged, in accordance with updated MARD procedures. Ultimately, ILS 70 million (USD 21 million) of the planned ILS 93 million (USD 28 million) were granted by the MARD to non-cultivating farmers.

In addition to the Shmita grants, the government allocated ILS 8 million (USD 2.4 million) to wheat and wine farmers who encountered kosher requirements related to the Shmita rules. Furthermore, a total of ILS 7 million (USD 2.1 million) was approved for 2021-22 investments in establishing new greenhouses in the non-Jewish production area b) converting to soil-less beds and hydroponics (a “specific circumstance” that allows cultivation during the Sabbatical Year).

The majority of the Jewish agricultural sector in Israel (more than 7 000 farmers) chose a different solution for the Shmita year (“sale permits”). In the Sabbatical year, the land “is sold” to whoever is not Jewish and thus it can be farmed in a similar way as a normal year. The Chief Rabbinate Office – a state institution – is handling the sale permits (contracts, legal fees etc.) (OECD, 2022[4]).

Regulatory oversight

In pursuing the application of OECD recommendations and government resolutions 2118/2014 and 4398/2018, the Israeli Knesset passed the Law of Fundamentals of Regulation in November 2021 (as part of the Arrangements Law for the 2021–2022 State Budget). The law entered into force on 1 January 2022 and established the Regulatory Oversight Body (ROB).

The role of ROB is to co-ordinate the government’s efforts to improve existing and new regulations. ROB will oversee the procedures for issuing new regulations, optimise the development process of new regulations and revise and streamline excessive ones. The law defines what an optimal regulation is, as well as what must be considered in determining one. It anchors various principles to ensure optimal regulation procedures – including examining considerations and alternatives, analysing data, and engaging in public discussion. Based on the law, new regulations and changes in existing policy require regulatory impact assessment (RIA) processes.

Several agriculture and food policy changes from the 2016 Burden Reduction Program were examined during the 2022 review processes by MARD. The ministry decided to streamline registration procedures for pesticides imported from authorised countries and to allow the transfer of about 75% of the work of constructing residue decline curves to private laboratories by facilitating the recognition process. In addition, MARD examined and decided to compare Israel’s policy related to breeding conditions of laying hens with the policies practiced in other developed countries.

Crop insurance against pest and diseases

To address concerns regarding the possible entry and establishment of new pests and diseases as markets become more open, the government launched in early 2023 a special compensation fund. This provides government-funded compensation for plant growers whose crops may need to be destroyed to prevent the spread of new diseases and pests.

Credit fund expansion

The scope of the state-guarantee credit fund for small or expanding farms was enlarged in 2023 to include livestock farmers. The government guarantees can be leveraged up to a maximum of ILS 125 million (USD 37 million). In addition, a new loan option is now available, offering credits of up to ILS 1 million (USD 0.3 million) for ten years to eligible farmers.

Water management

The year 2022 was the fifth year in a row with higher than average precipitation, exceeding the 80% forecast to reach 111% of the multi-year average precipitations. Most aquifers remain above acceptable sustainable level, as defined by the Water Authority. The Sea of Galilee maintained its high water level and low salinity. Water supply in northern rivers started the winter season at an above average level though low precipitation led to decreases in their levels between October and December 2022. In the southern part of the country, the level of precipitation has been below average, which resulted in increased water consumption from the national system.

The year 2023 precipitation forecast is 80% of the multi-year average. Water allocations for most of the country have remained unchanged compared to 2022. If the precipitation exceeds the multi-year average, the amount of water to farmers will be increased proportionally.

The work of connecting the Galilee and eastern valleys to the national system has been completed. Though its use is not foreseen for 2023, it will be possible to be used in the future. There is also progress in the Sorek Desalination Plant, and a new Desalination Plant in the Galilee is in its early phase.

The scheduled water price increases for farmers, as set out under the 2006 Farmers Agreement, ended in June 2022. The Water Authority is expected to increase water prices for all uses in 2023, although discussions continue between the Water Authority, the Ministry of Finance and the farmers representatives regarding the price schedule and compensation for farmers in the coming years.

Trade policy developments in 2022-23

In 2022 the Plant Protection and Inspection Services began using the IPPC GeNS (Generic ePhyto National System) for issuing electronic phytosanitary certificates for fresh herbs and cut flowers exported from Israel to the European Union. The e-Phyto certificate replaces the Phytosanitary Certificate that was dispatched manually and printed on dedicated paper. The certificate is issued under the international ISPM12 standard. During 2023 the use of e-Phyto in a computerized system for the management of plant import will begin.

In 2022, the Plant Protection and Inspection Services launched the “Ye’ela system”, a computerised system for the management of plant imports, including issuing import permits and clearance of consignments at the port of entry. The system aims to provide convenient and efficient access to all relevant information. Through the system, importers can receive the required service online, without the need to physically come to the office. The “Ye’ela system” also enables interfaces with other systems, such as e-Phyto, and the customs systems “Sha’ar olami” and “Maslul.”

The free trade agreement (FTA) with Korea, which was signed in 2021, entered into force in December 2022. The comprehensive economic partnership agreement (CEPA) with the United Arab Emirates is in ratification process and expected to enter into force in early 2023. Negotiations on new FTAs with the People’s Republic of China, Viet Nam, Guatemala, India, and a new comprehensive economic partnership agreement (CEPA) with Bahrain are at varying stages of progress. Revised FTAs with MERCOSUR and the United Kingdom are under negotiation.

Trade policy responses to Russia’s war of aggression in Ukraine

In response to the war in Ukraine, Israel has been seeking to diversify import sources, especially of primary commodities. This particularly relevant for wheat, where the MARD actively investigated alternatives to diversity its wheat resources, when price increased by 26% in the month following the launch of the Russian war.

The Russian war in Ukraine impacted egg imports to Israel, as Ukraine had supplied 30% of egg imports.1 To ensure the appropriate supply of eggs, whose consumption increases by about 10% in preparation of the Jewish holiday of Passover, Israel extended the permitted duration for the marketing of imported eggs from 21 days to 28 days following the day of laying in the country of origin. In return, the government also shortened the consumption period for eggs from 30 days after this marketing deadline in refrigerated conditions to 18 days, as approved by the Ministry of Health’s Food Service.

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 has been halved to under 1%, while the share of agriculture in GDP declined to 1.4% of during the same period.

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. While the agricultural sector is relatively diversified, most of the value of production and exports is generated by high value fruits and vegetables.

Table 16.4. Israel: Contextual indicators

	Israel		International comparison
	2000*	2021*	2000*	2021*
Economic context			Share in total of all countries
GDP (billion USD in PPPs)	162	413	0.40%	0.34%
Population (million)	6	9	0.15%	0.18%
Land area (thousand km2)	22	22	0.03%	0.03%
Agricultural area (AA) (thousand ha)	566	646	0.02%	0.02%
			All countries1
Population density (inhabitants/km2)	290	426	52	64
GDP per capita (USD in PPPs)	25 628	44 061	9 350	23 401
Trade as % of GDP	24.7	15.6	12.3	15.6
Agriculture in the economy			All countries1
Agriculture in GDP (%)	1.7	1.4	2.9	3.9
Agriculture share in employment (%)	2.2	0.8	-	-
Agro-food exports (% of total exports)	3.1	4.2	6.2	7.9
Agro-food imports (% of total imports)	5.3	8.9	5.5	7.2
Characteristics of the agricultural sector			All countries1
Crop in total agricultural production (%)	55	58	-	-
Livestock in total agricultural production (%)	45	42	-	-
Share of arable land in AA (%)	60	59	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.

Israel has maintained robust GDP growth exceeding 3% per year on average and close to full employment from 2017 to 2019. Its economy contracted in 2020 due to the COVID-19 pandemic and associated lockdown measures, but recovered quickly in 2021-22, while unemployment remained relatively low. At the same time inflation went up in 2021 to reach 4 % in 2022 after multiple years of fluctuations around zero (Figure 16.5).

Figure 16.5. Israel: Main economic indicators, 2000 to 2022

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

The agriculture trade balance of Israel continued to decline in 2021, with the value of imports of mostly processed food products exceeding the value of exports of mainly products for final consumption (Figure 16.6). This gradual shift may be partly influenced by the relative appreciation of the Israeli currency compared to the US dollar and the Euro since 2015.

Figure 16.6. Israel: Agro-food trade

 

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

Source: UN Comtrade Database.

Despite investments in agriculture innovation, the overall productivity of Israeli agriculture, measured by total factor productivity (TFP), has been declining between 2011-20. The modest agriculture output growth in this period can be attributed to the increased use in inputs, particularly land and the use of farm machinery, and intermediate inputs such as animal feed (Figure 16.7).

Agriculture’s water use performance has improved. Despite a significant increase in irrigation area, agriculture’s share of freshwater abstraction has declined by 46%, largely due to changes in water management, encompassing the use of recycled water, efficient irrigation technologies and water demand policies. Beyond water use, the environmental performance of Israel’s agriculture has deteriorated since 2000. Nutrient surpluses have grown over time, particularly due to the increase in the use of fertilisers, to reach a level over seven times the OECD average levels for nitrogen and over twenty times for phosphorus (Table 16.4).

Figure 16.7. Israel: Composition of agricultural output growth, 2011-20

Note: Primary factors comprise labour, land and capital (livestock and machinery). Intermediate input comprises materials (feed and fertiliser).

Source: USDA Economic Research Service Agricultural Productivity database.

Table 16.5. Israel: Productivity and environmental indicators

	Israel		International comparison
	1993-2002	2011-2020	1993-2002	2011-2020
			World
TFP annual growth rate (%)	2.3%	-1.3%	1.7%	1.1%
			OECD average
Environmental indicators	2000*	2021*	2000*	2021*
Nitrogen balance, kg/ha	188.8	224.4	32.2	30.4
Phosphorus balance, kg/ha	65.7	69.9	3.3	3.0
Agriculture share of total energy use (%)	1.2	2.1	1.7	2.0
Agriculture share of GHG emissions (%)	3.3	2.8	8.6	10.5
Share of irrigated land in AA (%)	43.4	69.7	-	-
Share of agriculture in water abstractions (%)¹	64.0	34.8	46.6	49.7
Water stress indicator	61.0	45.1	8.3	7.4

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

[5] Gruère, G., C. Ashley and J. Cadilhon (2018), “Reforming water policies in agriculture: Lessons from past reforms”, OECD Food, Agriculture and Fisheries Papers, No. 113, OECD Publishing, Paris, https://doi.org/10.1787/1826beee-en.

[4] OECD (2022), “Israel”, in Agricultural Policy Monitoring and Evaluation 2022: Reforming Agricultural Policies for Climate Change Mitigation, OECD Publishing, Paris, https://doi.org/10.1787/65b56695-en.

[6] OECD (2021), Agriculture and water policies: Main characteristics and evolution from 2009 to 2019- ISRAEL, Country profile, OECD, Paris., https://www.oecd.org/agriculture/topics/water-and-agriculture/documents/oecd-water-policies-country-note-israel.pdf.

[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.

[3] WTO (2019), Trade Policy Review: Israel 2018, Trade Policy Reviews, World Trade Organization, Geneva, https://doi.org/10.30875/5b4abf07-en.

[2] WTO, ITC and UNCTAD (2022), World Tariff Profiles 2022, WTO, ITC, UNCTAD, Geneva, https://www.wto.org/english/res_e/booksp_e/world_tariff_profiles22_e.pdf.

Note

← 1.  Other countries are also important providers. In particular, imports from Spain have increased in recent years and, in 2021, it exported about 61 million eggs to Israel, which constitutes about 35% of all imported eggs.