Agricultural Policy Monitoring and Evaluation 2024

15. Israel

Main findings

Support to agriculture

The share of producer support (Producer Support Estimate, PSE) in gross farm receipts amounted to 12.3% in 2021-23, below the OECD average and a significant reduction from the 2000-02 level of 19%. 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. Poultry producers benefit from the largest share of market price support, accounting for 46% of the total producer support in 2021-23. On average, border and price interventions raised producer prices by 12% relative to international prices in 2021-23.

Single Commodity Transfers (SCT) represented 84% of the PSE in 2021-23. Market price support is the main component of SCT: poultry, wheat, grapes, sheep meat and eggs have the highest share of SCT representing between 10.8% and 44% of the respective commodity gross farm receipts.

The General Services Support Estimate (GSSE) amounted to 2.5% of the value of the agriculture production in 2021-23, below the OECD average and a decline from 2000-02. These expenditures focused mostly on agricultural innovation and hydrological infrastructure. The Total Support Estimate (TSE) amounted to 0.3% of Gross Domestic Product (GDP) in 2021-23, half the share of the OECD average.

Key recent policy changes

The government has undertaken a broad set of measures to cope with the damages of the 7 October 2023 attacks and limit the effects of the evolving conflicts in the Middle East on agricultural activities and food security. Beyond emergency responses, this encompassed compensation, special incentives for planting, and a series of agricultural labour facilitation measures to address the major shortfall in field workers.

In response to growing discontent among affected stakeholders, related in part to a lack of compensation, the tariff reform for agricultural products was halted in December 2023. In 2024 custom tariffs for the concerned products will stay at their 2023 levels after two reduction phases.

An agreement with the egg growers’ organisation was signed and anchored in legislation. The reform of the egg sector includes the elimination of production quotas within ten years (by June 2033) with an option to extend the period for another three years and includes investments in new chicken coops and compensation for those leaving the sector.

Assessment and recommendations

• The Ministry of Agriculture and Rural Development swiftly adopted a series of necessary measures in response to the 7 October 2023 attacks and the evolving conflicts in the Middle East to alleviate their impacts on agricultural production and food supply chains. Any additional government effort deemed necessary to sustain agricultural activities should be tailored, targeted and temporary.

• Government policies foster sustainable productivity growth with a long-term and context specific focus as it seeks to enhance agriculture’s adaptation to climate change through innovation, research, and knowledge dissemination. This includes programmes to support technical changes, extension related activities, including the development of a climate-smart agriculture toolkit for producers. Continued efforts in co-ordination with farmers will help facilitate their transformative adaptation to more volatile climatic conditions.

• Reforms of agricultural support covering selected dairy and meat products, fruits, and vegetables that were started in recent years should proceed, as removing these market distorting measures will help lower food prices and associated food insecurity risks. The halting of the tariff reform on fruits and vegetables at the end of 2023 due to opposition shows the need to ensure appropriate information exchanges and temporary transitory measures for affected producers.

• Several commodities are subject to high levels of border protection. High tariffs for goods such as poultry meat or sheep meat could be gradually replaced by decoupled temporary payments on a transitional basis. The tariff system for agriculture could also be simplified, avoiding non-ad valorem tariffs. The adoption of further preferential or free trade agreements that include agriculture would help diversify food import sources and export destinations, therefore limiting risks of the reforms on local food security.

• Expenditure on agricultural knowledge and innovation systems should increase to improve the sector’s productivity and environmental performance. Limited production growth from 2012 to 2021 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 309 million (USD 90 million) annually during 2021-23 – towards agriculture knowledge and information systems for sustainable productivity growth.

• Water management, which succeeded to largely reduce agriculture’s dependence on freshwater resources, will continue to play a central role to adapt to extreme water risks in a changing climate. 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.

• The government should bolster its agri-environmental policy efforts to limit the sector’s greenhouse-gas (GHG) emissions and the very high nutrient surpluses associated with agriculture production. Regional agri-environmental programmes should be scaled up and complemented by targeted and result based 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.

Development of support to agriculture

Figure 15.1. Israel: Development of support to agriculture

Table 15.1. Israel: Estimates of support to agriculture

Million USD

	2000-02	2021-23	2021	2022	2023p
Total value of production (at farm gate)	3 337	10 198	10 018	10 418	10 158
of which: share of MPS commodities (%)	58.28	60.54	59.49	60.18	61.96
Total value of consumption (at farm gate)	3 635	12 174	12 297	11 778	12 448
Producer Support Estimate (PSE)	680	1 287	1 270	1 281	1 309
Support based on commodity output	485	1 068	1 040	1 053	1 111
Market price support¹	475	1 052	1 021	1 035	1 098
Positive market price support	489	1 061	1 023	1 039	1 121
Negative market price support	-14	-9	-1	-3	-23
Payments based on output	10	16	19	17	13
Payments based on input use	160	110	126	106	98
Based on variable input use	106	74	96	70	55
with input constraints	0	0	0	0	0
Based on fixed capital formation	42	16	11	13	24
with input constraints	0	0	0	0	0
Based on on-farm services	12	21	18	23	20
with input constraints	0	0	0	0	0
Payments based on current A/An/R/I, production required	25	103	97	116	95
Based on Receipts / Income	21	81	78	93	73
Based on Area planted / Animal numbers	4	21	19	23	22
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	6	7	7	5
With variable payment rates	5	6	7	7	5
with commodity exceptions	0	0	0	0	0
With fixed payment rates	2	0	0	0	0
with commodity exceptions	0	0	0	0	0
Payments based on non-commodity criteria	0	0	0	0	0
Based on long-term resource retirement	0	0	0	0	0
Based on a specific non-commodity output	0	0	0	0	0
Based on other non-commodity criteria	0	0	0	0	0
Miscellaneous payments	1	0	0	0	0
Percentage PSE (%)	19.02	12.34	12.37	12.02	12.62
Producer NPC (coeff.)	1.18	1.12	1.12	1.11	1.12
Producer NAC (coeff.)	1.23	1.14	1.14	1.14	1.14
General Services Support Estimate (GSSE)	100	258	272	267	234
Agricultural knowledge and innovation system	51	109	103	113	110
Inspection and control	16	28	25	33	26
Development and maintenance of infrastructure	10	102	121	102	84
Marketing and promotion	11	1	1	1	1
Cost of public stockholding	12	10	11	11	9
Miscellaneous	0	8	11	8	4
Percentage GSSE (% of TSE)	12.96	16.63	17.63	17.26	15.19
Consumer Support Estimate (CSE)	-612	-1 555	-1 585	-1 247	-1 832
Transfers to producers from consumers	-446	-1 028	-1 024	-998	-1 063
Other transfers from consumers	-172	-530	-566	-254	-770
Transfers to consumers from taxpayers	0	0	0	0	0
Excess feed cost	5	3	5	5	0
Percentage CSE (%)	-16.60	-12.83	-12.89	-10.59	-14.72
Consumer NPC (coeff.)	1.20	1.15	1.15	1.12	1.17
Consumer NAC (coeff.)	1.20	1.15	1.15	1.12	1.17
Total Support Estimate (TSE)	781	1 545	1 541	1 549	1 543
Transfers from consumers	617	1 558	1 590	1 252	1 832
Transfers from taxpayers	335	517	517	551	481
Budget revenues	-172	-530	-566	-254	-770
Percentage TSE (% of GDP)	0.59	0.30	0.32	0.30	0.30
Total Budgetary Support Estimate (TBSE)	305	493	520	514	445
Percentage TBSE (% of GDP)	0.23	0.10	0.11	0.10	0.09
GDP deflator (2000-02 = 100)	100	139	133	139	144
Exchange rate (national currency per USD)	4.34	3.43	3.23	3.36	3.69

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.

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.

Source: OECD (2024), “Producer and Consumer Support Estimates”, OECD Agricultural policy monitoring (database), https://data-explorer.oecd.org/.

Policy landscape

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 visas 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 worker 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 or 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 are applied along with border protection. This forms the basis for calculating maximum retail prices. 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 11.7% in 2022, down from 27.7% in 2012 but higher than the 3.4% average for non-agricultural goods (WTO, ITC and UNCTAD, 2023[2]). 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 selected dairy products and eggs, 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 2022, 20% of imported agricultural products were subjected to non-ad valorem rates, compared to around 4% for all goods (WTO, ITC and UNCTAD, 2023[2]). A 2022 reform to cut tariffs for an extensive list of fruits and vegetables was halted at the end of 2023 (OECD, 2023[4]).1 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). Except for beef, poultry, and mutton, and products thereof, there is no legal requirement that imported food and agricultural products be kosher.

Budgetary allocations for research and development account for over 20% of the annual agricultural budget in recent years. This includes a competitive research fund and an effective public extension service, which have allowed Israel to become a leader in agricultural technology, particularly for farming in arid and desert conditions.

While it has been actively supporting climate change adaptation in agriculture (see sections 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 (2.8% in 2022). Agriculture does not feature in Israel’s Nationally Determined Contribution or national mitigation plan. However, the government has facilitated developing and adopting a number of agriculture practices and technical measures to reduce GHG emissions in addition to generating other environmental and economic benefits (OECD, 2022[5]).

Innovation for sustainable productivity growth

Government policies foster sustainable productivity growth with a long-term and context specific focus as it seeks to enhance agriculture’s adaptation to climate change. The total agricultural innovation budget under the authority of the Chief Scientist of the Minister of Agriculture and Rural Development (MARD) reached ILS 45 million (USD 12 million) in 2023, including ILS 20 million (USD 5.4 million) for regional research and development centres and ILS 25 million (USD 6.8 million) to the call for proposals.

The following measures were taken to improve agricultural productivity sustainably in a changing climate:2

• Development of a climate-smart agriculture toolkit for farmers. One of the major applied research programmes launched by MARD’s Chief Scientist in 2023 involved funding research for short term solutions aiming to promote climate smart practices and technologies. Eight research proposals were selected and initiated.

• Investigating the required changes for food systems. This research programme aims at building a scientific basis to understand medium and long-term effects to facilitate the adaptation of all food systems components and activities to climate change. This covers production, consumption and their effects, as well as their economic, health and environmental outcomes.

• Improvement of fertility and productivity of soils and runoff management. MARD allocated ILS 2 million (USD 0.5 million) to knowledge generation and dissemination as well as methods to improve soil and runoff management in order to promote sustainable agriculture.

• Improvement of the pest-monitoring systems in view of future climate change related impacts and international exchange with other countries.

• Subsidies for Soil Conservation and Sustainable Agriculture. This voluntary programme with a budget of ILS 16.5 million (USD 4.5 million) in 2023 provides direct payments to farmers to convert from conventional tillage to soil conservation and sustainable agriculture practices that promote soil health, minimum soil disturbance, biological diversity, and improved microclimate with the view to enhance resilience of agricultural production and food security.

• Acceleration Program in Agriculture. Under this programme, in place during the last three years, MARD supports technological innovation in agriculture through a budget of ILS 19 million (USD 5 million). ILS 9 million (USD 2.4 million) was allocated to directly assist farmers with maximum funding covering up to 50% of their investment. ILS 20 million (USD 5.4 million), sourced 50/50 from MARD and the Innovation Authority, has been allocated to companies that develop innovative technologies and conduct experimental trials at farmers’ sites, with funding covering up to 60% of the investment.

Recent policy developments

Domestic policy developments in 2023-24

Policy measures adopted to cope with the impacts of the 7 October attacks and limit the effects of the evolving conflicts in the Middle East on the agricultural sector

The 7 October attacks have had a major effect on the agricultural sector. Many of the victims and injured were farmers or from farming communities. Some of the hostages were farmers or agricultural labourers. The attacks also killed livestock and caused widespread destruction of communities, many of them agricultural oriented.

As a result of the evolving conflicts in the Middle East, many cities and communities in southern and northern Israel have been evacuated, preventing many farmers from cultivating their fields and farms. Moreover, there has been a sharp drop, overnight, of over 50% of the Israeli agricultural workforce, with injured workers, the departure of 10 000 Thai workers, the interdiction of Palestinian workers to access Israeli farms and drafted Israeli workers. More specific impacts of the attacks and evolving conflicts in the Middle East are shown in Box 15.1.

Box 15.1. Impacts of the attacks and the evolving conflicts in the Middle East on Israel’s agriculture

As shown in Table 15.2, the impact of the 7 October attacks and evolving conflicts in the Middle East has been very significant on all agricultural production chains. This is particularly the case in the southern region of Israel, which was the most hit area from the attacks and the implications of the evolving conflicts in the Middle East. The area, which comprises 46 000 ha of which 38 000 ha is arable land, is Israel’s most important region for vegetables, producing 48% of the total Israeli tomato production, 38% of potatoes and 13% of wheat. MARD has estimated that 20 000 ha have been affected with about 15 000 ha being abandoned – resulting in complete yield loss, together with large destruction of infrastructures and equipment. An additional 5 000 ha (25%) are expected to provide reduced yield, with similar but less severe damage. The attacks and the evolving conflicts in the Middle East also impacted directly the Northern border area, with the evacuation of the population including agriculture-related workers and farmers and damages to production systems. This area is rich in fruit growing, cattle herding, poultry including for table egg production and milk. Farmers in other regions of Israel have also been indirectly affected via supply chain disruptions and economic impacts.

Table 15.2. Impacts of the attacks and evolving conflicts in the Middle East on agriculture production, October 2023-February 2024

	Production region	Production damage	Comment
Wheat	Southern region of Israel	50% of the 12 000 ha in the area, corresponding to 13% of total wheat production, out of production	Wheat mostly used for hay and silage (and not imported for SPS reasons) had to be planted elsewhere to feed animals
Vegetables	Southern region of Israel	20% area loss of greenhouse tomatoes, 2/3 or 1 000 ha of potato and carrot area was damaged, there were also impacts on zucchini, peppers, eggplants and celery	The area produces 50-70% of vegetables nationally. Tomatoes had to be imported from other countries
Fruits	North (5km from border)	Most apples, pears, banana and kiwifruits were not collected in this 20 000 ha area
Table egg and poultry	North (5km from border)	10 large chicken co-operatives were badly damaged, leading to the slaughter of 400 000 laying hens. Relocation of neighboring co-operatives was impossible, which led to the slaughtering of 300 000 chicks	The total producer estimates of farmer damages thus far is ILS 500 million (USD 135 million)
Dairy	Southern region of Israel	15 dairy farms, representing 7% of the Israeli milk quotas, were hit during the 7 October attacks, with many of their staff being murdered, kidnapped, or injured - as well as around 5 000 cows, hurt by direct shooting, missiles, fires, etc.	40% of the remaining cows never recovered
Mushroom	North (5km from border)	One of the largest agricultural plants, which produces approximately 30% of the mushroom production in Israel, was shut down as of October attacks	The plant employed about 250 workers and traded in the stock market

The government has been operating under a special state of emergency since 7 October 2023 in which MARD’s main objective is to ensure the smooth continuity and functionality of the Israeli agricultural sector and to help progress towards a prompt restoration. In this context, the ministry has adopted a broad set of short term and medium-term measures to help farmers, limit impacts on agriculture and food supply chains, and start recovery, as outlined below.

A few hours after the attacks had started, MARD’s CEO officially opened an Agriculture Emergency Center at the Ministry’s HQ. The Agriculture Emergency Center was available 24/7 for 10 weeks, and farmers directly hit or affected by the attacks contacted the centre by phone or email. During its operation, the Agriculture Emergency Center received over 5 000 inquiries, requesting assistance regarding workforce, security, financial aid, as well as other problems.

Exceptional financial support has been provided to different types of production to cope with shocks or enhance their efforts to continue supplying the domestic markets. More specifically, this support comprised of:

• Compensations for direct and indirect damages: in addition to compensations for any direct damage from the attacks and evolving conflicts in the Middle East, paid by the Israeli Government to the entire population (according to a set of national criteria), farmers living 0-7 km from the southern border or 0-9 km from the northern border, are entitled to advance payments for indirect damages. Farmers at further distances will also be compensated, based on defined criteria.

• Special incentive for wheat sowing: to maintain national wheat production for fodder despite the loss of 6 000 ha in the southern region of Israel, approximately ILS 9 million (USD 2.4 million), covering payments up to ILS 1 500 (USD 407) per hectare, were allocated as an incentive for growers to convert available areas into wheat (to be harvested between the months of March and May 2024).

• Special incentive for converting relevant fields for sowing potatoes and carrots: to ensure the supply flow of potatoes and carrots, with the southern region of Israel no longer able to produce these crops, a special incentive of up to ILS 9 500/ha (USD 2 600/ha) and ILS 7 million (USD 1.9 million) total was allocated to encourage producers with areas suitable for growing these crops, to prepare and adapt them for sowing.

• Special incentive for early planting of tomatoes: ILS 2 million (USD 0.5 million) was allocated by MARD for the early planting of fresh tomatoes throughout Israel to cope with the damaged and inactive greenhouse production in the southern region of Israel, which represented over 50% of total production.

• Special incentives for agricultural facilities: MARD allocated about ILS 20 million (USD 5.4 million) for the building of greenhouse and agricultural facilities in areas outside of the southern region of Israel, to grow a variety of crops, as well as to enable the reconstruction of destroyed greenhouses in the conflict areas. A complementary envelope of ILS 15 million (USD 4 million) was delivered for upgrading or constructing innovative technologies for vegetable greenhouses.

• Support for agricultural insurance: an additional subsidy was provided for insurance in affected agricultural areas in the southern region to cover the damages caused by the 7 October attacks and the evolving conflicts in the Middle East and help farmers continue to operate.

Several measures were taken by MARD to alleviate the impact of the large and sudden drop in the agricultural labour force in agriculture aiming to mobilise different groups of potential workers.

• In addition to the new quota of 9 000 foreign workers in agriculture approved just before the attacks, an additional quota of 10 000 was approved in January 2024, bringing the total quota of foreign agricultural workers to more than 50 000. Israel signed a bilateral agreement with Sri Lanka to allow foreign workers in agriculture to work in Israel and has started to negotiate similar agreements with other countries. The government ensured the rapid approval for 5 000 foreign workers via private contractors. Working permits that were about to expire were also extended, enabling skilled workers to prolong their stay until March 2024.

• Following a growing demand of volunteers from civil society to help on farms, MARD selected 24 NGOs that met specified criteria under a tender, to link and co-ordinate farmers and volunteers. ILS 50 million (USD 13.6 million) was allocated to fund these NGOs for transportation, food, and other logistical aspects. MARD also created a digital platform to link anyone wanting to volunteer with farmers in need and subsequently actively recruited volunteers in targeted groups such as the National Civil Service.

• MARD launched a campaign to try and recruit local workers, whose companies had been out of operation in the weeks following the attacks, to provide agricultural work. A financial incentive of ILS 3 000-ILS 20 000 (USD 800-USD 5 400) (depending on the area and duration) was offered on top of their regular salary. The programme was not continued as it did not register significant numbers of employees.

For the safety of farmers and workers, MARD allocated ILS 30 million (USD 8 million) to reinforce the pre‑existing security measures particularly in the southern and northern border regions.

The government also took action to limit agricultural marketing disruptions. The evolving conflicts in the Middle East created an unexpected logistical problem for Israeli farmers with shortages of trucks and drivers, many of whom had been drafted to serve in the military. MARD launched a co-operation with the digital platform “Trucknet” (a private start-up company), whose application – given to the farmers free of charge – helps to connect farmers with truck drivers who normally do not work with farmers, and thus improve the transportation logistics of fresh agricultural produce from the field to the points of sale. In parallel, a new law obliging retailers to mark the origin of fresh agriculture products sold in bulk that had been approved before October 2023 entered into force in December 2023. In addition, retailers voluntarily started to promote domestic products.

A series of measures was taken to cope with the impacts of the attacks and the evolving conflicts in the Middle East on farm animals and domestic pets. Many farm animals and pets were severely injured or abandoned by their owners (in many cases due to their death, abduction, or injury) in October 2023. MARD served as a focal point to resolve related issues. This included rescuing animals from the evacuated areas in co-operation with other organisations, and the redirection of animals saved to further care in safe locations.

Shortly after the 7 October attacks, the government established the Tekuma rehabilitation administration. This service is dedicated to the rehabilitation of affected areas, in co-operation with all government ministries and relevant bodies. MARD is taking an important part in the administration’s steering committee, whose rehabilitation plan is being formulated for the immediate term of up to two years and the long term of up to five years.

Other domestic policy developments

Fruits and vegetables sector

The tariff reform for fruits and vegetables was halted as of January 2024. The reform led to a fierce argument between different stakeholders, especially as the direct support to farmers component, originally planned, was not introduced. In December 2023, the Minister of Finance and MARD agreed to halt the next tariff reduction phases planned for 2024-27, and to leave the customs tariffs at their 2023 levels after two reduction phases.

To limit the effect on the production of garlic after the elimination of tariffs in March 2022, MARD allocated up to ILS 3 million (USD 0.8 million) to growers who have sown garlic in the fall of 2023 and have made a commitment to collect it for use as seed material for the 2024 season.

In the last quarter of 2023, MARD and the Ministry of Finance agreed to reduce the customs duties on olive oil to 10% of the tariff in January 2022. In exchange, it was agreed that a yearly support of ILS 30 million (USD 8 million) would be provided for growers of olives for olive oil, starting from early 2024. The amount of support will vary for irrigated or non-irrigated farmers.

Animal product sector

An agreement with the egg growers’ organisation was signed and anchored in legislation. The reform of the egg sector includes the abolishment of production quotas within ten years (by June 2033) with an option to extend the period for another three years. As part of the agreement, it was agreed that the government provide grants of ILS 380 million (USD 103 million) for the construction of chicken coops and ILS 100 million (USD 27 million) to redeem quotas from growers who choose to leave the industry.

The procedure for supporting the establishment and upgrading of cage-free co-operatives in the egg sector was published at the end of July 2023. Growers could apply for investment support until the end of October 2023. The October attacks in the north and the evacuation of the population living close to the northern border is obstructing the possibility to invest and construct new chicken coops and delaying the transition to upgraded chicken coops.

From May 2023, the update procedure of the controlled consumer prices under the Dairy Agreement is done automatically without the need of ministerial approval. Prices are updated based on a formula considering the development of input prices. The target price mechanism is planned to remain unchanged until 2025.

Planning, insurance, guaranteed fund and regulation requirements

A budget of ILS 25 million (USD 6.8 million) was set aside at the Ministry of Finance to prepare for the next Shmita year in 2028-29.3 MARD intends to assess the implications from the 2022 Shmita year and develop a plan to be produced in 2027 in preparation for 2028.

In 2024, a new insurance policy will become available under the agricultural insurance system (Kanat) to compensate for losses resulting from a bird flu outbreak. The government will cover 80% of the premium cost and offer reinsurance for the policy.

An additional ILS 10 million (USD 2.7 million) was allocated to the State Guaranteed Fund for Agriculture, enlarging the fund to a total ILS 120 million (USD 32.4 million) in 2023. The scope of the fund, which up until 2022 served only growers in the horticulture sector, was extended to include farmers in the animal husbandry sector. The farmers are entitled to request a loan of up to ILS 1 million (USD 0.3 million) with a state guarantee of up to 95% and a repayment period of up to 10 years. The loan can be purposed for investments, restocking, renewal of infrastructure, etc.

Regulatory flexibilities were introduced to enhance the efficiency of agriculture and food supply chains. This includes increased flexibility in the hours of poultry transportation to slaughterhouse, flexibility in sampling supervised raw meat facilities, adjustments to facilitate the export of fresh agricultural produce and the import of pets, or easing milk production requirements and automatic extension of animal food import permits. A digital platform was established to list and explain all the regulatory adjustments across ministries.

Water management

Water allocations remained unchanged in 2023. If the precipitation exceeds the multi-year average, the amount of water to farmers will be increased proportionally.4 The connection of the Sea of Galilee (Kinneret Lake) to the upgraded national water carrier system has been completed. Regarding the Upper Galilee, it was decided to develop a local project, instead of connecting it to the national system. There is also progress in the Sorek Desalination Plant, and a new Desalination Plant in the Galilee is in its early phase.

Policies to facilitate climate change mitigation and adaptation in agriculture

A previously existing programme to improve the treatment of organic agricultural waste was relaunched in 2023. ILS 10.4 million (USD 2.8 million) has been allocated for grants to promote green waste, reduce tree uprooting, animal mortality management and other actions.

MARD, in collaboration with the Ministry of Energy, is conducting a multi-faceted research pilot project to examine the potential mutual benefits of dual agriculture-photovoltaic practices (also known as Agri-PV). The purpose is to implement the results in planning and developing AGRI PV commercial projects. The allocated research budget for the first year is ILS 14 million (USD 3.8 million) and the project is expected to span between three and five years. In addition, ILS 2.3 million (USD 0.6 million) was provided for the BIG Data Company to collect and analyse the data from the entire project. The aim of the pilot is to provide information of the best combination of photovoltaic technologies without affecting crops yields.

Government decision 207 of 2023 ordered the MARD to draw a plan considering flood risk management programmes for each watershed in Israel. These future programmes will result in operative strategies and action items to be delivered by approximately the end of 2025. The action items include solutions suggested for areas challenged by conflicts of urban development in flood plains. A new modelling study completed in 2023 found that 9% of agricultural land in Israel is at severe to high risk of soil erosion by water. The expected increase in sediment yield will affect the required budget for maintenance of flood regulation and retention reservoirs. Concurrently, new methods are being developed to help decision-makers to identify and prioritise agricultural source areas where intervention is needed for proper ecosystem stream management to improve soil conservation, protect water quality, and reduce flooding, with the overall goal of increasing resilience to climate change.

Trade policy developments in 2023-24

Trade policy measures adopted to cope with the impacts of the attacks and limit the effects of the evolving conflicts in the Middle East on the agricultural sector

A WTO duty free quota of 50 million eggs was introduced when the northern border area was attacked, acknowledging that about 70% of local egg production is located in this area. This quota, however, has not been used due to the high prices in source countries and local supply eventually increased.

After a first three-month suspension of raw milk customs between July and early October 2023, these customs were suspended again in response to the significant damages to the dairy production system in the southern region of Israel. This temporary measure which only resulted in 441 000 litres of additional milk import (after 667 000 litres during the first period), expired on 18 January 2024. The affected region represents 7% of total production.

The tariff reform for fruits and vegetables that was introduced in 2022 was halted in 2023. The reforms raised concerns that growing imports, particularly of tomatoes, would result in long term production capacity losses.

Other trade policy developments

In October 2023, the Plant Protection and Inspection Services (PPIS) notified the official contact points of all IPPC member states that Israel is prepared to accept e-Phytos from all contracting parties for the import of plants and plant products. The e-Phyto certificate will continue to gradually replace the Phytosanitary Certificate that was dispatched manually and printed on dedicated paper. The certificate is issued under the international ISPM12 standard.

The comprehensive economic partnership agreement (CEPA) with the United Arab Emirates entered into force on 1 April 2023. New free trade agreements (FTAs) negotiated with Guatemala and Viet Nam are in ratification process.

Negotiations on new FTAs with the People’s Republic of China, 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.

Policy context

Key economic and agricultural statistics

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 66%. 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 20 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 15.3. Israel: Contextual indicators

	Israel		International comparison
	2000*	2022*	2000*	2022*
Economic context			Share in total of all countries
GDP (billion USD in PPPs)	162	476	0.40%	0.35%
Population (million)	6	10	0.15%	0.18%
Land area (thousand km2)	22	22	0.00%	0.00%
Agricultural area (AA) (thousand ha)	566	644	0.00%	0.00%
			All countries1
Population density (inhabitants/km2)	282	415	52	64
GDP per capita (USD in PPPs)	25 664	49 789	9 363	25 965
Trade as % of GDP	24.7	17.2	12.3	16.6
Agriculture in the economy			All countries1
Agriculture in GDP (%)	1.7	1.4	2.9	3.8
Agriculture share in employment (%)	2.2	0.8	-	-
Agro-food exports (% of total exports)	3.1	3.4	6.4	8.0
Agro-food imports (% of total imports)	5.3	8.7	5.8	6.9
Characteristics of the agricultural sector			All countries1
Crop in total agricultural production (%)	55	55	-	-
Livestock in total agricultural production (%)	45	45	-	-
Share of arable land in AA (%)	60	59	32	34

Note: *or closest available year.

1. Average of all countries covered in this report.

Sources: OECD statistical databases; International Labour Organization (ILO); UN Comtrade; World Bank, WDI; FAO database 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 and 2023 after multiple years of fluctuations around zero (Figure 15.4).

Israel is a consistent net-importer of agro-food products, and the agriculture trade balance continued to decline in 2022, with the value of imports of mainly processed food products exceeding the value of exports of mainly primary products for consumption (Figure 15.5). This gradual shift may be partly influenced by the relative appreciation of the Israeli currency compared to the US dollar and the Euro between 2015‑2021, and most recently the tariff reductions to specific commodities.

Despite investments in agriculture innovation, the overall productivity of Israeli agriculture, measured by total factor productivity (TFP), has been declining between 2012-21. The modest agriculture output growth in this period can be attributed to the increased use in inputs, particularly the use of farm machinery, and intermediate inputs such as animal feed (Figure 15.6).

Beyond a substantial reduction in freshwater use, the environmental performance of Israel’s agriculture has been mixed since 2000. Despite a 76% increase in irrigation area, agriculture’s share of freshwater abstraction has declined by more than 30 percentage-points, largely due to changes in water management, encompassing the extensive use of recycled water, efficient irrigation technologies and water demand policies. Nitrogen surplus has grown over time, particularly due to the increase in the use of fertilisers, to reach a level over seven times the OECD average level, while Phosphorus balance declined somewhat but remains excessively high; close to thirty times the OECD average (Table 15.4).

Table 15.4. Israel: Productivity and environmental indicators

	Israel		International comparison
	1991-2000	2012-2021	1991-2000	2012-2021
			World
TFP annual growth rate (%)	2.3%	-1.5%	1.7%	1.1%
			OECD average
Environmental indicators	2000*	2022*	2000*	2022*
Nitrogen balance, kg/ha	184.6	197.7	32.1	28.2
Phosphorus balance, kg/ha	64.1	62.6	3.3	2.3
Agriculture share of total energy use (%)	1.2	2.1	1.7	2.0
Agriculture share of GHG emissions (%)	3.3	3.0	8.7	10.1
Share of irrigated land in AA (%)	43.4	67.2	-	-
Share of agriculture in water abstractions (%)¹	64.0	33.4	47.0	49.5
Water stress indicator	61.0	53.1	8.7	..

Note: * 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.

Historical trends in agricultural policies

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 main objectives are 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 15.5).

Table 15.5. 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 freshwater 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
2010-2023	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 from 2022-2023 (halted in 2024) 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 corresponding to changes in water price support), as budgetary support to producers remained relatively stable. The market price support results mainly from guaranteed minimum prices and import tariffs, while budgetary support is mostly provided based on current production and input use. (Figure 15.7).

References

[4] OECD (2023), “Israel”, in Agricultural Policy Monitoring and Evaluation 2023: Adapting Agriculture to Climate Change, OECD Publishing, Paris, https://doi.org/10.1787/69aaf264-en.

[5] 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.

[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 (2023), World Tariff Profiles 2023, WTO, ITC, UNCTAD, Genega, https://www.wto.org/english/res_e/booksp_e/world_tariff_profiles23_e.pdf.

Notes

← 1.  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 would be decreasing gradually by 10% a year for 5 years, while custom duties for eight major vegetables and fruits would be lowered slower over time (OECD, 2023[4]).

← 2.  Other measures on climate change mitigation and adaptation are reported in other parts of the chapter.

← 3.  For explanations on grants to support the Jewish Schmita (Sabbatical) Year, see OECD (2023[4]).

← 4.  Precipitation in 2023 was 90% of the multi-year average.