Israel’s Agriculture Market


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Israel’s Agriculture Market

  1. 1. Survey of Agricultural Inputs and Services Prepared forThe Israel Export and International Cooperation Institute Agro-Technology, Water & Environment Department By Dr. Dan Dvoskin , Yanai Information Resources Ltd. February, 2012 Yanai Information Resources
  2. 2. Changes in World AgricultureOver 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. Yanai Information Resources
  3. 3. 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. Yanai Information Resources
  4. 4. 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. Yanai Information Resources
  5. 5. 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. Yanai Information Resources
  6. 6. Export Development of Ag InputsTwo 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. Yanai Information Resources
  7. 7. 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 Yanai Information Resources
  8. 8. 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 Yanai Information Resources
  9. 9. Globalization of Agricultural InputsThe 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. Yanai Information Resources
  10. 10. 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. Yanai Information Resources
  11. 11. 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. Yanai Information Resources
  12. 12. Business Categories1. Fertilizers2. Irrigation3. Other Agricultural Chemicals4. Agricultural Equipment and Supplies5. Seeds and Propagation Material6. Post-Harvest Treatment7. Dairy Equipment and Supplies8. Consulting, Planning, Management9. Greenhouses and Covered Systems10. Monitoring and Control11. Aquaculture12. Poultry Equipment and Supplies Categories are defined to present a unique area of activity, and are not based on the input componentsYanai Information Resources
  13. 13. Exports of Agricultural Inputs 2008 – 2011 ($1000) Category 2008 2009 2010 2011Fertilizers 2,017,883 1,019,137 1,442,948 1,709,047Irrigation 489,596 376,199 448,184 589,796Other Agricultural Chemicals 388,819 327,694 373,277 383,649Agricultural Equipment and Supplies 168,316 145,989 160,097 197,397Seeds and Propagation Material 109,816 89,809 120,979 145,107Post-Harvest Treatment 134,527 127,481 122,795 132,973Dairy Equipment and Supplies 102,689 79,680 96,298 115,745Consulting, Planning, Management 55,307 40,872 61,620 67,121Greenhouses and Covered Systems 34,445 22,514 35,928 45,321Monitoring and Control 9,467 7,171 7,983 11,498Aquaculture 5,296 3,630 2,209 4,043Poultry Equipment and Supplies 2,239 2,490 1,524 2,277Total Agricultural Inputs 3,518,400 2,242,666 2,873,842 3,403,974 Yanai Information Resources
  14. 14. 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 Yanai Information Resources
  15. 15. 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.Yanai Information Resources
  16. 16. Accumulated Growth 2008 - 2011Yanai Information Resources
  17. 17. Exports of Agricultural Inputs ($ million)Despite the decline in Fertilizer exports since 2008, the increase in othercategories returned the level of total exports in the sector to the level of 2008. Yanai Information Resources
  18. 18. Exports of Agricultural Inputs in 2011 ($ million)Yanai Information Resources
  19. 19. Exports of Agricultural Inputs in 2011, excluding Fertilizers, ($ million)Yanai Information Resources
  20. 20. 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%. Yanai Information Resources
  21. 21. 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) Yanai Information Resources
  22. 22. 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 ($million, % of sector exports) (number of companies) Yanai Information Resources
  23. 23. 20 Main Target Markets for Inputs• 67% of exports of agricultural inputs (excl Fertilizers) are sold to 20 major markets. No one country is dominant, Spain is largest client. Exports excluding Fertilizers by Market Country ($million, %) Yanai Information Resources
  24. 24. 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 Yanai Information Resources
  25. 25. Exports by Category and Market in 2011 Fertilizers, Other Chemicals ($1000) Fertilizers: $1.7 Billion Other Chemicals: $384 million2 companies account for almost all 1 company accounts for almost all exports in this category exports in this category Yanai Information Resources
  26. 26. Exports by Category and Market in 2011 Irrigation, Agricultural Equipment and Supplies ($1000) Irrigation: Agricultural Equipment and Supplies: $590 Million $198 million5 companies account for 70% of exports 3 companies account for 95% of • in this sector exports in this sector Yanai Information Resources
  27. 27. Exports by Category and Market in 2011 Irrigation, Agricultural Equipment and Supplies ($1000) Seeds and Propagation Material: Post Harvest Treatment: $145 Million $133 million5 companies account for 95% of exports in 3 companies account for 70% of • this sector exports in this sector Yanai Information Resources
  28. 28. Exports by Category and Market in 2011 Irrigation, Agricultural Equipment and Supplies ($1000) Dairy Equipment and Supplies: Consulting, Planning, Management $116 Million $67 million4 companies account for 95% of exports 5 companies account for 95% of • in this sector exports in this sector Yanai Information Resources
  29. 29. Exports by Category and Market in 2011 Irrigation, Agricultural Equipment and Supplies ($1000)Greenhouses and Covered Systems: Monitoring and Control: $45 Million $11.5 million5 companies account for 95% of exports 4 companies account for 85% of • in this sector exports in this sector Yanai Information Resources
  30. 30. Exports by Category and Market in 2011 Irrigation, Agricultural Equipment and Supplies ($1000) Aquaculture: Poultry Equipment and Supplies: $4.0 Million $2.3 million1 company accounts for 50% of exports in 1 company accounts for 90% of exports this sector in this sector Yanai Information Resources
  31. 31. 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. Yanai Information Resources
  32. 32. 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. Yanai Information Resources
  33. 33. 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. Yanai Information Resources