|Exporting High-Value Food Commodities: Success Stories from Developing Countries (WB, 1993, 119 p.)|
|Appendix The development and performance of case study commodity systems|
Despite very limited natural resources, considerable distances to major international markets, a tiny domestic market, and the dislocations of several major wars, the area now constituting modern-day Israel supported a large and internationally competitive fresh citrus trade for approximately a century, from the 1880s to the 1980s. Our focus here is on the sustained growth of Israeli citrus production and fresh exports between 1950 and 1980 and its subsequent decline. During its favorable development years, this subsector nurtured one of the world's most recognized name brands for fresh produce ("Jaffa") and exported through a marketing organization (the Citrus Marketing Board) which was viewed by many outside observers as one of the world's most effective state-run or-sanctioned trading organizations.
While citrus production in the area dates back about a thousand years, Israel's citrus export trade has its origins in commercial plantings made in the Jaffa and Petah Tikva areas between the 1860s and 1880s. An export trade, featuring orange sales to England (and secondarily to Egypt) and lemon sales to Russia, developed steadily between 1880 and World War I, reaching 30,500 tons in 1913. Following a disruption during the war and a slow recovery in the early 1920s, citrus production and trade in British-ruled Mandate Palestine underwent a boom. This boom was based on both private and public investments, especially in irrigation, in packing houses, and in a deep water port with facilities for refrigerated shipments. Citrus plantings increased nine-fold between 1926 and 1936, leading the colony to become the world's fifth largest citrus producer. With Spain embroiled in civil war, Palestine became the world's premier citrus exporter in the late 1930s, with shipments to Europe exceeding 500,000 metric tons. Fresh citrus exports accounted for nearly 95% of the colony's agricultural exports and 75% of its total merchandise exports. While the citrus trade was diversified to include sales of grapefruit (formerly virtually unknown in Europe) and sales to several continental European markets, the subsector was plagued by declining export prices, partly a consequence of the poor coordination among the colony's many private and cooperative exporters.
Both World War II and the subsequent war of 1948 greatly disrupted citrus production and trade. Irregular sailings to Europe and the devastation there cut down war-time shipments from eastern Mediterranean citrus suppliers to minimal quantities. While some exports were made to Egypt and while a domestic processing industry expanded to utilize the available raw materials, much of the citrus production went unharvested for several years and many orchards were neglected or abandoned.
In the immediate post-war years, attention focused on rehabilitation of orchards, packing houses, transport facilities, etc., made possible in part by a loan from the U.S. Export-Import Bank. In 1947, a Citrus Marketing Board was established and granted export marketing rights. It would utilize the pre-war private and cooperative exporters as "contractors" for procuring and packing the fruit.
By the early 1950s, Israel was experiencing rapid economic growth, fueled by large capital investments and a massive immigration. The citrus subsector, still the leading source of foreign exchange earnings, also underwent a boom which would continue through the mid-1960s. Significant private and public sector investments were made, resulting in an expansion of the planted area of citrus from less than 14,000 hectares to over 40,000 hectares, the modernization and greater centralization of citrus packing, improvements in quality control and transport infrastructure, a large expansion in the capacity of the domestic processing industry, and the development of an overseas network of trading offices and distribution depots.
With West European citrus demand growing rapidly and with Mediterranean citrus production recovering slowly, a seller's market prevailed into the mid-1960s. With the Citrus Marketing Board controlling market outlets and distribution channels, with sales made under the well recognized and respected "Jaffa" label, and with the benefit of several devaluations of the Israeli currency, the earnings realized by local growers were very favorable. Israel's world (and Mediterranean supplier) market shares for oranges and grapefruits rose steadily through the 1950s and 1960s. With market shares for oranges and grapefruit of more than 25 % in certain markets and in certain months, Israel's single exporter cartel (e.g. the Citrus Marketing Board) had a strong bargaining position vis-a-vis foreign buyers and agents.
Although Israeli citrus production and exports continued to expand through the late 1970s, the subsector began to face increased difficulties in selling its fruit abroad as a result of increased competition from other Mediterranean suppliers (principally Spain, Morocco, and Cyprus) and changing consumer tastes. The Citrus Marketing Board, previously an effective 'seller' of fruit to markets with already developed citrus demand, needed to re-orient itself to being a 'marketer' of fruit, nurturing new demand patterns. While the Board launched successful citrus consumption and utilization campaigns in several countries, it could not sell (at remunerative prices) the greatly increased output from the country's maturing orchards and had to direct a larger proportion of fruit to the processing industry. The Board, which for a variety of reasons played little to no role in the planning of the earlier planting boom, found itself with a product mix which was becoming less favored among European consumers. While consumers indicated a preference for 'easy peeling' oranges and tangerines and for the sweeter red grapefruit, the Board's product line was dominated by the traditional Shamuti (Jaffa) orange and by white grapefruits.
The 1980s witnessed a major decline in the international competitiveness and profitability of Israel's fresh citrus exports. In the course of the decade, more than 20% of the planted citrus area was uprooted, more than half of the country's packing houses were mothballed, export volumes fell below their levels of the early 1960s and late 193&, and pressures mounted to have the Citrus Marketing Board disbanded. With fresh citrus exports declining rapidly and with grower and packing groups pressing for the right to undertake their own marketing, the Citrus Marketing Board export monopoly was rescinded in 1991
Israel Fresh Citrus
Source: Statistical Abstracts of Israel; Citrus Marketing Board of Israel
Several factors contributed to the major decline in Israel's fresh citrus trade during the 1980s. Among these included:
1) the rapid cost inflation which the country (and subsector) experienced during the early-to-mid-1980s,
2) the strength of the US $ (the accounting unit for the CMB) vis-a-vis European currencies in the early 1980s,
3) a significant rise in international shipping costs during the early 1980s,
4) the general financial crisis experienced by many of Israel's agricultural settlements,
5) the continued improper product mix for exports with only small quantities of the favored varieties being available,
6) conflicts of interest within the subsector which translated into weakened incentives for product innovation and quality improvement,
7) an inability on the part of the Citrus Marketing Board, largely for legal and political reasons, to restructure the trade in the face of foreign and domestic challenges so to maintain competitiveness and profitability, and
8) an expansion and quality improvement in Spanish citrus production.