◼ ECONOMICS Bloomberg Businessweek March 9, 202030
“We don’t want
to be caught in
a trap as far as
water goes”THE BOTTOM LINE Agriculture has fallen to 2% of goods exports
in Israel as a strengthening currency, rising labor costs, and scarce
water supplies have rendered many farms unprofitable.services in 2020 poised to surpass goods exports
for the first time. The shift “from basic agriculture
like Jaffa oranges to top-of-the-line tech” makes eco-
nomic sense, says Karnit Flug, former governor of
the country’s central bank, now a vice president
at the Israel Democracy Institute research center.
“Israel doesn’t have any comparative advantage in
agriculture. Water is not abundant here. Land is
not abundant here.”
The changing fortunes of farmers were a potent
political issue in the election campaign that ended
on March 2, Israel’s third in the past 11 months.
Prime Minister Benjamin Netanyahu—who won
a plurality in voting—promised stronger support
for agriculture to lower food prices. “You’re real
patriots,” Netanyahu told farmers in December.
“You protect the land, and we will protect you.”
His primary rival, Benny Gantz, who grew up in
a farming community, pledged to allow entry to
more foreigners to work the fields to double farm
exports within five years. Farmers “guard the bor-
ders, open territories, and offer food security,”
Gantz wrote on Facebook.
One sector that’s prospering even as farming
suffers sits at the intersection of tech and agricul-
ture. The country has more than 200 startups in
that field, with venture capitalists more than dou-
bling annual investment over the past five years,
to $100 million-plus in 2019, according to Start-Up
Nation Central, a business advocacy group.
Netafim, a pioneer in drip irrigation started in 1965,
has added sensors and software that allow farm-
ers to precisely control the water their crops get.
Taranis, founded in 2015, provides high-resolution
aerial imagery to help growers decide precisely
where they need to apply more water, pesticides,
or herbicides. And Vertical Field, founded in 2006,
is expanding to the U.S. with its technology for
growing plants on walls, allowing for more efficient
use of space—and water. “We’re using every drop,”
says Chief Executive Officer Guy Elitzur.
Orange farmer Zehavi says he spends about
2,000 shekels ($580) a month on water for his
600 trees in the summer months—whereas rivals
across the border in Egypt pay nothing for water.
While Israeli farms are among the world’s most
efficient in irrigation, the cost of water, combined
with rising salaries and the shekel’s 21% apprecia-
tion against the dollar this century, has priced the
country out of many export markets. Agriculture
workers in Israel earn about $2,200 per month,
10 times what similar jobs in neighboring countries
pay. In regional rivals such as Egypt, Turkey, and
Morocco, “labor is very cheap, and water is very
cheap, and the currency is better for exporters,”says Nitzan Rottman, who oversees work on citrus
at Israel’s Ministry of Agriculture. “We can’t com-
pete with them.”
Some farmers are shifting from crops such as
oranges—water-intensive even with the best irri-
gation systems—to less-thirsty alternatives such as
grapes, olives, and Argania spinosa, the nut tree
that produces argan oil for shampoos and skin
creams. And climate change, which has made rain-
fall more volatile and increased fears of a prolonged
drought, has accelerated that shift, says Elaine
Solowey, who teaches sustainable agriculture at the
Arava Institute, a research center in Israel’s bone-
dry Negev Desert. “We don’t want to be caught in a
trap as far as water goes,” she says. “We’re hoping
to start diversifying and have other orchards ready
relatively quickly.”
With suburban development encroaching on his
five acres of Jaffa orange trees, Zehavi came up with
a different solution: a pick-your-own operation.
When he pilots his tractor along the road linking
the two sections of his orchard about a half-hour
south of Tel Aviv by car, he says, “People look at
you like, Where the hell did you come from?” But
those suburbanites, nostalgic for a slice of the Israel
of their grandparents, flock to his grove on week-
ends to pick bushels of oranges for 7 shekels a kilo.
“I want children to see where oranges come from,”
he says. “And it’s not just from the supermarket.”
�Ivan Levingston◀ Ottoman growers
developed the Jaffa
orange, and by the
1920s it was exported
across the Middle East
and Europe