Israel’s Agriculture Market

Survey of
Agricultural Inputs and Services
Prepared for
The Israel Export and International Cooperation Institute
Agro-Technology, Water & Environment Department

By Dr. Dan Dvoskin , Yanai Information Resources Ltd.

February, 2012
Yanai Information Resources

Changes in World Agriculture
Over the last ten years world agriculture has seen dramatic changes:
Rapid economic growth in some countries, along with a great rise in
living standards in developing countries such as China and India,
which together account for a third of world population.
Severe changes in climate as a result of global warming, bringing both
droughts and floods which damaged agricultural production.
Shift of production resources from food production to fuel production.
Expansion of population and conversion of farmland to urban areas.
− All of these causes have led to a reduction of commodity stocks,
strong price increases (e.g. cotton ) and ever increasing stress on
agricultural resources, particularly land and water.
– The days are past when many countries had to reduce production
surpluses.
– For the long term, agricultural production must be increased.
Cultivation of additional area can make only a limited contribution.
Increased agricultural production must come principally from existing
physical resources, by shifting to advanced agricultural technology.

Future Developments

• The Food and Agricultural Organization of the UN (FAO) predicts that
world population in 2030 will be 87% greater than in the 1970’s.

• By the year 2050, population growth will require a 70% increase in
world food production and a 100% increase in food production in
developing countries, compared to 2009 levels.

• The major addition to agricultural product will come from greater
intensification of production on existing fields, through massive
expansion of areas using advanced irrigation.

• This effort is aimed at increasing production, saving limited water
resources, and preventing environmental damage that has already
ruined agricultural lands on a worldwide scale.


Future Developments – con’t

• By 2050, there will be an additional 32 million hectare of irrigated
area worldwide (16 times the size of the State of Israel), almost all of
that increase in developing countries.
• In addition to advanced irrigation, FAO experts predict massive
increase in fertilizer use, expansion of use of high-quality, high-yield
varieties, improvements in post harvest treatment, and strengthening
of agricultural extension and research.
• The economic viability of new farming technologies has increased
significantly, as a result of the sharp increase in commodity prices.
• These technological improvements go hand in hand with the
increased demand in developed countries for higher quality products
and healthier products.


Israel’s Agriculture - an Example for the World

• Israeli agriculture is seen as a world-class example of the ability of
advanced technology to change a semi-arid land, with serious security
problems, into one of the great success stories of world agriculture.
• Agricultural productivity in Israel has grown by a factor of 10 since the
1950’s, while the amount of water used in agriculture has been
substantially reduced, as have labor inputs.
• Through advanced technology, Israel has reached record highs in
productivity per unit for dairy cattle, cotton, olives, and other products.
• Israel’s agricultural technology and broad range of know-how, has
become a well known brand-name for success in the agricultural
world.
• Agricultural technology accompanied by Israeli management has
become a sought-after product in world agriculture
• Israeli remains well known for breakthrough technology in advanced
irrigation, greenhouse systems, vegetable seeds, plant protection and
pest management, computerized monitoring and control, and more.

Export Development of Ag Inputs
Two major export sectors:
Fertilizer and Chemicals – using Israel’s mineral resources
• Fertilizers, and some other agricultural chemical exports, come from
Israel’s mineral resources (Dead Sea, phosphates) The extent that
these natural resources are exploited determines the scale of exports.

Agricultural Technology – using Israel’s human resources
• Most other exports of agricultural inputs are based on decades of
development of technology and know-how, in search of solutions for
Israeli agricultural constraints: scarcity of water and manpower.
• Scale of this technology sector is based on Israel’s capacity for
development and marketing – it is not limited by natural resources.
Israeli companies sell “Israeli smarts” in the form of agricultural inputs.
• In most cases, exports in this sector come from innovations developed
for Israeli agriculture, which has served as the testing station and the
trial fields for the technology that is exported.
• Since this sector has no physical limitations, as public and private
investment in the sector grows, so will exports grow.

Export Sectors: Irrigation, Greenhouses
Advanced Irrigation
• Second most important sector for exports of agricultural inputs
• Developed in order to deal with Israel water scarcity, costs, quality,
recycling, and shortage of labor
• As a result, Israel became world leader in advanced irrigation and “the
brand” for irrigation
• International concerns have invested in Israel and bought Israeli
companies; Israeli firms produce domestically and abroad

Greenhouses
• Developed specialized greenhouses for Israeli climatic conditions
• Improved export-quality crops and saved water
• Israeli greenhouses models and technology for operating systems is
marketed worldwide


Export Sectors: Vegetable Seeds, Dairy,
Vegetable Seeds
• Developed to answer the needs of Israeli export farmers for high quality
products produced in conditions of scarce land and water
• Unique varieties developed with long shelf life, very high yields, able to
withstand hot climates, and more
• Not a large export branch, but considered “best in class” for vegetables
• International concerns have invested in and bought Israeli companies

Dairy
• Developed to deal with shortage of production resources, harsh and hot
climate, labor shortage, and need for self-supply of basic foodstuffs
• Result is the development of most advanced technology for the dairy
sector, marketed throughout the world


Globalization of Agricultural Inputs
The Israeli industry is part of the world market:
• Israeli firms established manufacturing companies abroad to be closer
to market demand.
• International firms and funds invest in Israeli input manufacturers and
exporters based on their international business. Worldwide turnover of
Israeli fertilizer and irrigation firms are estimated at $3 billion this year.
• Netafim leads the irrigation category, with 32 foreign subsidiaries; ICL
leads the fertilizer category, with 10 foreign subsidiaries.
• International investment in Israeli irrigation: Netafim is controlled by the
Pan European Permira Funds; Plastro is fully owned by John Deere;
Naan holds 50% of its merger partner, the Indian firm Jain Irrigation.
• In the seed category, leading companies are owned by international
firms: Hazera Genetics by Limagrain; Gedera Seeds by Syngenta.
• China National Chemicals has purchased control of crop protection
producer Makhteshim-Agan; John Deere bought BJC, a cotton
equipment firm at Beit HaShita.

Factors for Globalization

• Foreign manufacturing and service subsidiaries are important for
Israeli firms to serve their target markets from nearby.
• Irrigation firms in particular need physical presence near their
customers to best serve farmers.
• Although foreign manufacture is not export from Israel, Israeli
factories benefit by export of accessories and other inputs to foreign
subsidiaries.
• The added value of international operations returns to the Israeli
owners. The State of Israel benefits as well from the taxes on
international profits.
• As globalization increases in the sector, international operations will
become even more important for Israeli firms in the future.


Research and Development

• Most of Israel’s agricultural input industry is the legacy of over 80 years
of research and development.
• R&D lead to advancement of highly modern agriculture in Israel, and to
development of a major export industry.
• In the past, much of the finance for agricultural R&D came from
government sources. Today, principal R&D funding in the inputs sector
comes from the companies themselves, and from dozens of private
entrepreneurs and investors.
• Efforts include projects to improve irrigation efficiency, to reduce
chemical usage, to improve handling treatment, storage and shelf-life,
and others areas.
• In practice, entrepreneurs have difficulty funding complete
development and the introduction of products to the world market.


Business Categories
1. Fertilizers
2. Irrigation
3. Other Agricultural Chemicals
4. Agricultural Equipment and Supplies
5. Seeds and Propagation Material
6. Post-Harvest Treatment
7. Dairy Equipment and Supplies
8. Consulting, Planning, Management
9. Greenhouses and Covered Systems
10. Monitoring and Control
11. Aquaculture
12. Poultry Equipment and Supplies
Categories are defined to present a unique area of
activity, and are not based on the input components

Exports of Agricultural Inputs
2008 – 2011 ($1000)
Category 2008 2009 2010 2011
Fertilizers 2,017,883 1,019,137 1,442,948 1,709,047
Irrigation 489,596 376,199 448,184 589,796
Other Agricultural Chemicals 388,819 327,694 373,277 383,649
Agricultural Equipment and Supplies 168,316 145,989 160,097 197,397
Seeds and Propagation Material 109,816 89,809 120,979 145,107
Post-Harvest Treatment 134,527 127,481 122,795 132,973
Dairy Equipment and Supplies 102,689 79,680 96,298 115,745
Consulting, Planning, Management 55,307 40,872 61,620 67,121
Greenhouses and Covered Systems 34,445 22,514 35,928 45,321
Monitoring and Control 9,467 7,171 7,983 11,498
Aquaculture 5,296 3,630 2,209 4,043
Poultry Equipment and Supplies 2,239 2,490 1,524 2,277
Total Agricultural Inputs 3,518,400 2,242,666 2,873,842 3,403,974


Exports by Categories, including Fertilizers

Category 2008 2009 2010 2011
Fertilizers 57.4% 45.4% 50.2% 50.2%
Irrigation 13.9% 16.8% 15.6% 17.3%
Other Agricultural Chemicals 11.1% 14.6% 13.0% 11.3%
Agricultural Equipment and Supplies 4.8% 6.5% 5.6% 5.8%
Seeds and Propagation Material 3.1% 4.0% 4.2% 4.3%
Post-Harvest Treatment 3.8% 5.7% 4.3% 3.9%
Dairy Equipment and Supplies 2.9% 3.6% 3.4% 3.4%
Consulting, Planning, Management 1.6% 1.8% 2.1% 2.0%
Greenhouses and Covered Systems 1.0% 1.0% 1.3% 1.3%
Monitoring and Control 0.3% 0.3% 0.3% 0.3%
Aquaculture 0.2% 0.2% 0.1% 0.1%
Poultry Equipment and Supplies 0.1% 0.1% 0.1% 0.1%
Total Agricultural Inputs 100.0% 100.0% 100.0% 100.0%

• Fertilizers, Irrigation, and Other Chemicals together are about 80%
of total export of agricultural inputs


Export Growth by Category
Category 2009 2010 2011
Fertilizers -49.5% 41.6% 18.4%
Irrigation -23.2% 19.1% 31.6%
Other Agricultural Chemicals -15.7% 13.9% 2.8%
Agricultural Equipment and Supplies -13.3% 9.7% 23.3%
Seeds and Propagation Material -18.2% 34.7% 19.9%
Post-Harvest Treatment -5.2% -3.7% 8.3%
Dairy Equipment and Supplies -22.4% 20.9% 20.2%
Consulting, Planning, Management -26.1% 50.8% 8.9%
Greenhouses and Covered Systems -34.6% 59.6% 26.1%
Monitoring and Control -24.3% 11.3% 44.0%
Aquaculture -31.5% -39.1% 83.1%
Poultry Equipment and Supplies 11.2% -38.8% 49.4%
Total Agricultural Inputs -36.3% 28.1% 18.4%

• The financial crisis in late 2008 resulted in a sharp decline of exports in
2009, particularly for fertilizers and irrigation
• Since 2010, exports grew and returned to the level of 2008.


Accumulated Growth 2008 - 2011


Exports of Agricultural Inputs
($ million)

Despite the decline in Fertilizer exports since 2008, the increase in other
categories returned the level of total exports in the sector to the level of 2008.


Exports of Agricultural Inputs in 2011
($ million)


Exports of Agricultural Inputs in 2011,
excluding Fertilizers,
($ million)


Exports by Categories, excluding fertilizers

Category 2008 2009 2010 2011
Irrigation 32.6% 30.7% 31.3% 34.8%
Other Agricultural Chemicals 25.9% 26.8% 26.1% 22.6%
Agricultural Equipment and Supplies 11.2% 11.9% 11.2% 11.6%
Seeds and Propagation Material 7.3% 7.3% 8.5% 8.6%
Post-Harvest Treatment 9.0% 10.4% 8.6% 7.8%
Dairy Equipment and Supplies 6.8% 6.5% 6.7% 6.8%
Consulting, Planning, Management 3.7% 3.3% 4.3% 4.0%
Greenhouses and Covered Systems 2.3% 1.8% 2.5% 2.7%
Monitoring and Control 0.6% 0.6% 0.6% 0.7%
Aquaculture 0.4% 0.3% 0.2% 0.2%
Poultry Equipment and Supplies 0.1% 0.2% 0.1% 0.1%

Without fertilizers, the irrigation category represents about 35% of the sector’s
exports, with other chemicals at 23%.


Exports of Ag Inputs excl Fertilizers
by Company Size, in 2011
- Company Size Defined by Annual Export Value:
Small : up to $10 million Midsize: $10 to $50 million Large: above $50 million
- About 80% of the companies are small, only 7 large companies
- Large companies exported 66% of all agricultural imports excluding Fertilizers, while small
companies accounted for only 7 % of that total

Exports by Company Size Export Companies by Size
($million, % of sector exports) (number of companies)


Exports of Irrigation Category
by Company Size, in 2011

• Three large companies export 68% of value of the irrigation category

Exports by Company Size Export Companies by Size
($million, % of sector exports) (number of companies)


20 Main Target Markets for Inputs

• 67% of exports of agricultural inputs (excl Fertilizers) are sold to 20
major markets. No one country is dominant, Spain is largest client.

Exports excluding Fertilizers by Market Country
($million, %)


Exports by Category and Market in 2011
($1000)
Total Exports of Agricultural Inputs : Exports of Agricultural Inputs
$3.4 Billion excluding Fertilizers:
$1.7 Billion


Fertilizers, Other Chemicals
($1000)
Fertilizers: $1.7 Billion Other Chemicals: $384 million
2 companies account for almost all 1 company accounts for almost all
exports in this category exports in this category


Irrigation, Agricultural Equipment and Supplies
($1000)
Irrigation: Agricultural Equipment and Supplies:
$590 Million $198 million
5 companies account for 70% of exports 3 companies account for 95% of •
in this sector exports in this sector


($1000)
Seeds and Propagation Material: Post Harvest Treatment:
5 companies account for 95% of exports in 3 companies account for 70% of •
this sector exports in this sector


($1000)
Dairy Equipment and Supplies: Consulting, Planning, Management


($1000)
Greenhouses and Covered Systems: Monitoring and Control:
$45 Million $11.5 million


($1000)
Aquaculture: Poultry Equipment and Supplies:
$4.0 Million $2.3 million
1 company accounts for 50% of exports in 1 company accounts for 90% of exports
this sector in this sector


Recent Development in Exports

• The peak year for exports of agricultural inputs came in 2008, when
high world commodity prices led to increased demand.
• The financial crisis of 2008, the stalled development of bio-energy
crops, and the slowdown in the world economy, led to sharp reduction
in demand for agricultural inputs, continuing through 2009 and into
2010.
• In 2010 and 2011 demand grew substantially and exports of inputs
grew by about 36% over two years.
• Greatest variability was seen in the fertilizers and irrigation categories.
• Particularly fast growth is seen in the project management and export
of know-how, in recognition of the capabilities of Israeli agriculture.


Integration of Export Activity

• Much of the change in export activities in recent years has been related
to the globalization of the industry. In addition, consulting and integration
companies have been more active in marketing Israeli capabilities for
project planning and management.
• These integrators identify entrepreneurial opportunities based on know-
how, professional skills and inputs from Israeli companies. Their
activities often are the primary channel to open new markets for Israeli
technology.
• There are more than 10 companies active today in integrated projects.
Some of these companies leading integrated agricultural projects are
active as well in developing countries’ markets in security,
telecommunications, and construction.


Summary and Conclusion
• The scope and volume of exports in the agricultural inputs sector is
today considerably greater than what had be accepted in the past.
• The changed view is an outcome of a more thorough survey of the
sector, and a real increase in export activity by the companies in the
sector.
• After a sharp drop in export activity in 2009, export levels in 2010 and
2011 returned the sector to its proportions before the financial crisis
• The leading business categories are Fertilizers, Irrigation, and Other
Chemicals, which together account for about 80% of exports.
• Recent years have seen the effect of globalization on the sector, with
international concerns investing in or purchasing outright Israeli
producers of agricultural inputs.
• At the same time, Israeli firms are moving more of their activities abroad
to their target markets.
• Turnover of Israeli-owned companies operating in the sector outside of
Israel (manufacturing and marketing) is estimated at $1.8 billion dollars,
and it is expected to grow.
• Israel’s Agricultural Inputs Sector is a strong global player.

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