“Agrexco was a good thing for Israel”

Decent Israeli pepper prices now, problems persist

The domestic market for Israeli peppers has been good as of late, with growers getting prices they haven't seen in some time. But prospects for pepper growers in the Arava Valley continue to be dim, as there's still competition from Spain and Africa, and the Russian market continues to disappoint.

Eyal Sahar from Gilad Desert Produce
“A big setback is the delay of quantity, size and volume of the produce, due to very warm weather in September and October. The pepper season has started later than it was supposed to and we are still short of produce where as by now it was supposed to be of high quantity's. We are struggling to deliver orders,” said Eyal Sahar of Gilad Produce.
Israeli growers produced about 140,000 tons of pepper last year, and about 90,000 tons of that came from the Arava Valley. This year, production for the entire country is expected to drop to 90,000 tons because many growers aren't seeing the returns necessary to justify sticking with peppers. A large part of the problem is competition from Spain, where shippers have lower transportation and logistics costs because of their proximity to Western European countries, but the disappointing Russian market is also a factor.

Good atmosphere at the work place
“We took over the Russian market and shipped too much volume there,” said Eyal. “If the market could take 200 containers of peppers a week, Israeli exporters tried to send 350 containers. It was a disaster.” Many shippers prefer not to go to Russia because of the variability of the currency there and a business climate which is unlike that found in Israel or Western Europe. But as Israeli peppers were being edged out of the market by Spanish product, the Russian ban on European goods left the market open for Israeli shippers to take advantage of. That returns have not been great has contributed to many Israeli growers abandoning peppers altogether.
“To add to this, we had bad weather this past year,” said Eyal. “Our advantage is that we're in the desert where it's dry and isolated. We don't have to deal with the pests and disease that come with high humidity. But we had a very rainy season that was a disaster.” The valley got about double the amount of precipitation it normally gets, and production and quality suffered as a result. While that thinned out volumes and made for a better domestic market, it was another challenge in a growing list of obstacles that the valley's growers have to contend with.

Process from sorting to packing
Forced market shifts

About three years ago, 70 percent of Israeli pepper exports went to Western Europe, about a quarter went to Russia and the remaining five percent was sold in the United States. But lower production and transportation costs in Spain have forced Israel's exporters to change their sales portfolios. Now, 60 or 70 percent of exports go to Russia and only about a quarter go to Western Europe. The United States takes a lot of peppers during winter months, but high freight costs prevent shippers from moving lots of volume there.
“We're also trying to do different varieties with peppers and go with higher quality products,” said Eyal. “We're working hard to convince growers to plant high-quality peppers that, while not yielding as much per hectare, can get better prices and help us win back some of the market in a few years.” But it's tough convincing growers to abandon their tried and true Canon red pepper. Eyal describes that product, which makes up about half of the overall pepper crop, as the grower's insurance policy. In a grower's mind, that high-yield variety can carry an operation through a lean year with sheer volume. The challenge is to convince growers that volume alone will not solve current problems.

Agrexco's fall bitter-sweet
One of the reasons pepper growers are in such dire straits, Eyal believes, is because the agricultural industry in Israel doesn't have a voice to speak for it. There have been attempts to get the attention of legislators, but growers remain without much political clout. That was not always the case.
“It's hard for me to say it because I was one of its competitors, but Agrexco was a good thing for Israel,” admitted Eyal. “The company was a lobby for the agriculture industry in Israel and abroad. They did a lot of promotion and advocacy for Israeli produce, and now that's missing.” In its wake are lots of small growers who don't have the resources to open new markets or make big moves that Eyal feels are necessary in order to improve returns.
“Now there are companies that will just buy something for one Euro in order to sell it for one Euro and ten cents,” said Eyal. “They don't have the money to promote and do new things.”

Change is inevitable
There are rumblings that this year's Spanish pepper crop will be lighter than usual. If that's the case, Israeli growers can sell more peppers in Western Europe. But in the long term, Eyal believes Spain has cornered the European market. They may overextend themselves and export too much for their own good, but the days of Israeli peppers having a strong foothold in Europe are gone. The way forward is not clear because high production and labor costs, high transportation and logistics costs and a lack of government support continue to plague the valley's pepper growers. What's clear is growers will have to change in order to survive.
“This village was a melon village before peppers and then we lost melons to South America,” said Eyal. “We can convince growers to go to other crops, like we did with herbs, but then production of herbs goes to Africa because of lower labor costs.” There isn't an obvious alternative to peppers, and pepper production will continue to decrease. Whatever the next step, Eyal is hopeful the valley's growers can handle it.
“People here are a little different,” said Eyal. “It's a small community and everyone knows each other, so we won't leave that in a hurry. Maybe we'll have to reduce pepper production another 20 percent, I don't know. It's hard to answer what the future will be, but I know we have high quality people here who can produce other things.”

For more information:
Eyal Sahar
Gilad Desert Produce
Tel: +972 8 6582515

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