The Beef Industry in Israel: An Overview


auctio10Dr. Dan Dvoskin and Samuel J. Cohen

Introduction

Over the last five years, the big story for beef producers in Israel has been the increase in local supply of beef as a result of imported calves, and the development of an active feedlot industry. Until the mid-1990s, fresh beef was limited to domestic slaughter of dairy culls and cattle from a small 50,000 – 60,000 head beef herd.  About two-thirds of Israeli beef consumption was imported frozen beef.  Since 1996, a relaxing of trade restrictions has allowed duty free imports of live feeder beef calves. Thus the supply of fresh beef has nearly doubled since 1997, to over 45,000 tons per year, and domestic slaughter has supplemented imports so that nearly half of the country’s beef supply is now fresh beef from local producers.

 

Consumption of Beef in Israel

 

Consumption of beef in Israel has increased from about 80,000 of meat in 1997, to over 105,000 in 2002.[1]  Much of the increased demand is a result of population growth (16% in the period) and increased standard of living. Per capita consumption has grown from about 15 kg. per year to about 17 kg. [2]

 

Chart from “Cattle, Beef, and Everything in Between -Production of Beef in Israel”, Israel Dairy Board, 2003.

 

Nevertheless, beef remains the second most popular meat in the Israeli diet. Chicken accounts for about 60% supply of all meats, and turkey consumption is also high by international comparison.

 

 

 

Annual Kg per Capita
MEAT – TOTAL 74.7
Chicken 45.5
Fresh Beef 8.7
Frozen Beef 8.7
Turkey 4.3
Lamb 0.5
Pork 1.8
Other 5.2

 

 

Frozen Beef Imports

 

For over two decades, South America has been the primary source of Israel’s frozen beef imports. Until 1993, all meat imports were carried out by a government monopoly purchasing authority. While private importers since then have found some alternative sources, and while some sources have been shut off by outbreaks of foot and mouth disease and BSE, the major suppliers remain Argentina, Brazil, Paraguay and Uruguay. Small supplies have come in from year to year from the Netherlands, U.K. and the U.S.  Low price is the determining factor for imported beef.  Total beef import quantities have apparently ranged between 47,000 and 61,000 tons over the last five years.

 

Imports of Frozen Beef – MT

1997 1998 1999 2000 2001 2002
52,250 46,742 48,798 61,076 54,600 55,300

 

 

 

Data from Israel Central Bureau of Statistics, Import-Export CD-Rom

 

 

No fresh beef is imported into Israel. From most sources, the duty of 100% within a tariff rate quota of 37,000, and 213% outside of the TRQ, is prohibitive.

 

The U.S. does have a duty-free tariff rate quota of 1,200 tons for fresh or chilled beef imported into Israel. In theory, this quota could be utilized. However, Israel’s Meat Import Law requires that all meat imported into Israel be kosher meat, approved by the Israeli Chief Rabbinate. So far, there have been several attempts to get Israeli rabbinic approval for kosher beef slaughtered in the U.S. – but none of the attempts have been successful for long.

 

The Israeli Rabbinate requires that the cow be slaughtered in a prone position – not stunned and hanging upside down as in the U.S. Israel Rabbinate approves South American slaughter where the cow is tied and laying on the ground, but US veterinary and hygiene authorities do not generally approve that system. One solution is a turning box, used in Europe and sometimes in South America. There have been several unsuccessful attempts to use the turning box in the U.S. For a full description and additional kosher slaughter regulations, see the USDA report http://www.fas.usda.gov/gainfiles/200107/120681187.pdf.

 

The Structure of Israel’s Beef Industry

 

Israel’s beef industry is essentially a by-product of its highly developed dairy sector. The national dairy herd, which has remained constant at 115,000 to 120,000 head, naturally provides male calves, unneeded heifers and older cull cows for the beef supply. Since Israel cannot economically export most of its milk products, the growth of the dairy industry is limited to the rate of population growth, less increased dairy productivity. A statutory system of milk quotas, managed by the Israel milk Board, guards against overproduction in the dairy sector.  There is also a strong move toward consolidation of the dairy herds, which both increases productivity as well as enabling better environmental compliance.

 

The generally arid climate of much of the country, and the high population density in the non-arid regions, creates a severe shortage of natural pasture for a large beef industry. For many years, the national beef herd has been in the range of 31,000 to 34,000 head, and is not expected to grow. Furthermore, its existence has been supported by government per-head grazing subsidies in order to allow it to be profitably sustained on existing pasture. The future of this subsidy is not certain.[3]

 

The beef herds are served by well managed breeder herds. These operations sell weaned calves to stockers and breeding calves to herd owners.  They maintain pure breeds and try to make genetic improvement of the breed.  Most beef cattle are of four breeds: Simmental, Charolais, Limousin, and Simford (a cross between Hereford and Simmental).  The herds are generally small.  Artificial insemination is used more in the breeder herds than in commercial herds.[4]


Beef Ranchers

For the pasture-based beef production herd, agro-technical and economic considerations are centered on the production of beef. About 15% of Israel’s fresh beef comes from this source. The average herd size is 250 head, and eighty percent of the beef herd is in the less-arid north of the country. Cull cows from the beef cattle herd are usually marketed at the end of the green pasture season (May-June) without any special feeding before slaughter. Most of the bull calves from the beef cattle herd are weaned at the end of the green pasture season at live weights ranging between 200 to 250 kg and placed in feedlots until attaining slaughter weights of about 500 kg.  About 40% of female calves are raised to replace cull cows, the remainder being fattened in feedlots.  Reproductive life in the herd is usually about 9 years.4

Dairy Farmers

 

About 40% of local beef slaughtered comes from the local dairy herds.  The Holstein-Friesian dairy herds, totaling about 120,000 head total, send essentially all of their male calves, plus their excess heifers not needed for herd replacement, to feed lots for fattening. In many cases, these feed lots are in fact simply an auxiliary facility next to the dairy herd, owned and operated by the same dairy herd owner.  Older cull cows, about 35% of the herd per year, are sent directly to slaughter.

 

Imported Calves

 

To supplement the beef supply Israel began in 1995 to import large quantities of feeder calves for fattening in feedlots, and slaughter. The pressure for the imports came as a result of increased demand for beef from a growing population. Israeli beef interests realized that if they opposed the growth of the feedlot industry, based on imported calves, the only alternative would be some solution that would allow easier imports of fresh or frozen beef.  At the same time, the opening of diplomatic relations with Jordan allowed cooperation in livestock imports and veterinary regulations – the Jordanians had been imported Australian cattle and sheep for years.

 

The Palestinian Authority, which has no dairy herd of its own, also takes a significant part of this import trade. In principal, (but only in principal) the calves imported by Palestinian traders are slaughtered in the Palestinian Authority and are for consumption in PA. Most are slaughtered soon after arrival – not held in feedlots.  They are included in the Israeli statistics because the beef market of Israel and the Palestinian Authority is largely integrated. Some Palestinian imports are in fact placed in feedlots in Israel before moving to the PA for slaughter.  Furthermore, the veterinary arrangements are handled jointly.

 

Since 1995, the import trade has developed significantly and lead to the growth of the feedlot industry in Israel.

Chart data from Israel Milk Board table below

 

There are two primary lines of trade: About 20,000 calves were shipped in by air from Hungary in 2003. [5]  Most of these are small calves, about 55-60 kg, primarily excess bull calves from dairy herds. Importers who operate the trade buy the calves in Hungary at Euro 2.30 / kg. and pay for the air transport and the veterinary quarantine in Israel. The going price for these calves in Israel in late 2003 was $306 per head. The importers make a practice of taking firm orders for the stock before they carry out the import each month.[6]

 

About 5,000 head of the Hungarian imports were larger 220 kg. calves from mixed beef herds. These calves were purchased in Hungary for Euro 2.00 / kg. and sold in Israel for about $660 a head.6

 

More large calves, 220-240 kg, are imported by sea from Australia.  These bull calves are pasture-raised beef varieties, the best being Black Angus breeds. The calves are imported by a Jordanian merchant who operates special livestock boats for the trade. The calves are shipped first to Aquba, the Jordanian port on the Red Sea. From the boat, the herds are accompanied by veterinarians and trucked to a special transfer station on the Israeli-Jordanian border. They are then transferred to Israeli trucks and move to quarantine. The logistical arrangements in the heat of the Arava desert have been criticized, but no alternative has yet been arranged.

Recently, Israeli beef buyers traveled to Australia to make their own arrangements and picks of herds, but the logistic arrangements and the actual sales are still controlled by the Jordanian trader. Israeli purchasers paid $2600 per ton ($650 per head) c.i.f.  at the Israeli-Jordan crossing station for the best quality calves. Lower quality calves were sold for $550-$575.[7]

 

Imports of Australian calves to Israel for fattening reached about 10,000 head in 2003 – half the volume of the Hungarian trade. However, the Palestinian Authority imported an additional 31,000 head from Australia for direct slaughter.

 

The detailed development of the trade appears in the table below.

 

Imports of Live Cattle 1997-2002 and 2003 estimate

1997 1998 1999 2000 2001 2002 2003 est.
Breeding 87 218 62 134 95
Heifers 1,458 1,223
Bull Calves for Fattening 4,900 12,438 41,625 56,663 84,516 56,727 30,820
Milk Veal Calves 2,952 6,084 9,505 8,854 9,787 6,468
Calves for Slaughter* 282 8,190 7,842 20,737 8,943 16,875 31,153
Total 8,221 28,388 60,257 86,388 103,246 80,165 61,973

*Imported for and by the Palestinian Authority from Australia

Data from Israel Milk Board, 2002 Yearbook plus importer estimate for 2003.

 

The turndown in the last two years had two causes:

– Until the discovery of BSE in Poland in the spring of 2002, Poland had been the major source of small calves. All imports from Poland have been banned since 2002

The alternative imports from Hungary have filled in only some of the gap.

– the continued contraction of the Israeli economy, which has lead to weakened  consumer  demand for higher priced food items

 

Customs Import Policy

 

In order to allow Israeli feedlot operators to benefit from the trade, Israel provides a duty-free tariff quota of 120,000 head per year for “live bovine of average weight of less than 240 kg. each” (528 lbs. average weight by shipment). In practice, this tariff quota is not fully utilized, but it is reasonable to assume that if there is demand for increased imports, the Ministry of Agriculture would not oppose an increase in the quota. While a few countries are promised a portion of the quota, in practice, all MFN nations have duty-free access for calves under 240 kg.

 

The administration of the quota does require special notification and approval of each shipment by the Ministry of Agriculture Foreign Trade Center, and more importantly, advance approval by the Veterinary Authority.

 

Live bovine above 240 kg. average weight may also be imported into Israel outside of the tariff quota with customs charge of 1.2 NIS per kg, (about $0.11 per pound.) Some 5,000 head of cattle were imported with customs paid in 2001.

 

There is also some discussion of raising the 240 kg. limit in the duty-free quota to 260 or 270 kg., (572 or 594 pounds). Israeli beef producers are opposing this proposed change.

 

 

Feedlots

 

In most Israeli feedlots, calves are housed in open sheds while the flooring of the pen area either concrete or compressed earth. Some earthen lots have concrete flooring bordering the feeding troughs,

 

In 2002, the Beef Growers Section of the Israel Milk Board carried out a survey of all feedlot operations in Israel. The survey found some 775 operating feedlots, with a total of 115,000 feeding stations.

 

Feedlot locations were often operated in conjunction with dairy or beef operations:

  • 537 lots, 74,000 stations – adjacent to milk herds
  • 48 feedlots, 20,5000 stations – adjacent to beef herds
  • 190 feedlots, 46,000 stations – independent feedlots.

 

 

 Data from the Israel Milk Board 2002 Feedlot survey

 

Feedlot production regimes

In the feed lots, the larger imported claves are taken in at about 240 kg. and fattened for 90 days to be sold as “mature bull calves.” The smaller European calves are held for up to 6 months before slaughter.

In the U.S., bulls are castrated in order to provide a larger proportion of hindquarter meat (and a more docile animal) since in the U.S. hindquarters have a higher consumer price.  In Israel however, kosher meat has a much higher price, and kosher meat generally comes from the forequarters.

The bulls also gain more rapidly and more efficiently than steers and produce leaner carcasses that are more variable in tenderness. Even though the bulls are more difficult to manage than steers or heifers, in Israel, the bulls remain bulls. They are marketed at an average live weight of 400 -500 kg at an age of 12 months.[8]

Bull calves from the beef herd also come to the feedlots for about 90 to 170 days, depending on the time of year and are also slaughtered at 500-550 kg…

Heifers from the beef and dairy herds come in lighter to the feed lots and are send to slaughter at about 400 kg.

Some 10% of bull calves are sent to the feedlots immediately at birth and are fattened using a special feeding system and sold as “baby beef” (marketed at an average live weight of 220 kg and an age of 6 months).

Israeli feedlots generally use rough feed mixed with concentrate grain. Average daily weight gain is about 1.3 kg.

The profitability of feedlot operations in Israel, particularly the independent operation, is dependent on several factors. Some are the same factors as in feedlot operation around the world: changes in the feed grain and cattle markets over time, operational efficiency, buying and marketing skills of the operator. In some cases, the feed lot operator is working on a pension basis – so that only his operating efficiency is tested.

Kosher Considerations

In any herd of calves, some of the calves will become kosher meat and some percentage of the calves will be rejected for kosher meat. The kosher distinction of each individual calf is made only after slaughter, but the cattle often are sold at live weight to traders. Whoever is the buyer and seller of the cattle, a determining factor for profitability in Israel is the degree of kosher calves in any herd.

The primary reason for failure to meet the kosher requirements is the fitness of the calf’s lungs. In order for the slaughtered carcass to be certified kosher after slaughter, the lungs must be without seepage (inflatable), and without scar tissue. If the lungs are damaged, the entire carcass is not kosher, and the seller receives a lower price. If the lungs are fit and other kosher requirements are met, then the forequarters of the carcass can be certified as kosher meat. The hindquarters are sold at the non-kosher price.

The fitness of the lungs is generally a function of respiratory illness the calf has suffered, and in large part, the type and the hygiene of the food he has received. Thus, the source and treatment of the calves seems to determine the kosher percentages of the carcass. Calves from the Israeli dairy herd have kosher percentages of between 55-75%. Most observers believe that the percentage of the Polish dairy calves was similar. Calves from the Israeli beef herd show kosher percentages of over 85%. Australian calves apparently yield about 60%-75% kosher carcasses. The geographic location of the herd in Israel is also thought to be a major indicator of the kosher rates of the cattle.[9]

Because of the substantial price gap between kosher and non-kosher meat, the percentage of kosher carcasses produced by beef from any source will be a major factor in the long-term profitability of the trade. Because of this, efforts must be made to insure that the calves remain strong and healthy during transport, with as little as possible disturbance during shipment, with particular concern for respiratory diseases.

One caveat must be added to the discussion of kosher beef.  According to several surveys, some 50%-70% of the Israel population does in fact keep some degree of kosher observance and prefers to buy kosher meat. Thus it is likely that some price premium for kosher meat will remain. Yet part of the reduced price for non-kosher meat in Israel has been the lack of a well organized marketing system for this meat. The three largest Israeli supermarket chains, for example, will sell only kosher meat. The marketing network for beef in the Arab sector has been under-developed. This situation is clearly changing in recent years, as new non-kosher chains and up-scale retailers appear in the market. Thus it is likely that the price gap between kosher and non-kosher meat may be reduced as demand for non-kosher beef increases.

 

 

Slaughter Houses 

Some 17 slaughterhouses currently have veterinary authorization in Israel. Most are small to medium size operations, built over 20 years ago. Three or four of the larger slaughter houses have had some building upgrades in recent years. Several of the slaughter houses are owned by municipalities, and other serve only local needs. Only a few of the slaughter houses are buyers of cattle and distributors of beef. Most basically provide services at a set fee for cattle buyers and beef distributors. A considerable portion of the beef slaughter houses operate in the Arab sector. These facilities slaughter both for kosher and non-kosher end customers. With few exceptions, the slaughter facilities process the carcasses only to quarters.

 

The overall level of slaughter facilities in the country is far below the agro-technical level of the rest of the dairy and beef industry. This situation is expected to change in late 2004, as Tnuva, Israel’s largest food cooperative, completes construction of a new large beef slaughter and packing plant in Beit Shan. Tnuva also plans to exercise control of the beef raising and operations. More information about this initiative will be presented separately.

Estimate of beef slaughtered in 2002, by source

  Head
Dairy Herd  
Cows 40,000
Bulls and Heifers 55,000
Total 95,000
Beef Herd
Cows 5,000
Heifers 13,000
Fattening bulls 17,000
Total 35,000
Imported Calves Slaughtered in 2002 115,000
Grand total 245,000

 

 

 

 

 

 

 

Table Data: Israel Milk Board, 2002 Yearbook

 

Processors and Distributors

After slaughter, beef is transferred to a large number of distributors who sell quarters or cuts to supermarkets and butchers, or to processors who market somewhat more processed fresh products. A few integrated operations such as the Marbek and Tabach firms do exist. These firms both operate slaughter houses, process carcasses into quarters and cuts, and distribute to supermarkets and others. Some distributors, as well as the supermarket chains, hold fresh beef for aging.

Frozen Processors

Some of the distributors and most of the processors deal with frozen imported beef as well as fresh beef.  Throughout the Israeli food industry, the frozen imported beef is the less expensive alternative to fresh Israeli beef, selling at wholesale for half of the price of fresh beef.  Many institutional kitchens, from hospitals to kibbutzim to the army, use frozen beef exclusively, for budget reasons.

The frozen beef is imported both in small cuts and in quarters. Smaller cuts and individual roasts are sold at retail. Most of the imported beef goes to processors who cut and package a wide variety of user-ready meat products. Israel is one of the few countries where processors may legally inject up to 10% added water and additives into frozen beef products.

Another controversial practice is the processing of frozen beef into “aged” beef. Israeli health regulations allow frozen beef to be thawed, koshered, and stored in vacuum packs of up to 5 kg. After 14 days of curing, the beef can be marketed for another 30 days.  Israeli regulations require that this aged beef from frozen beef be clearly labeled as such, yet since it is sold chilled and not frozen, it is often regarded as fresh by the consumer. This “fresh from frozen” beef is attracting growing popularity from consumers. This has become a very profitable product line for processors and retailers, as the price of these products has moved up from the level of frozen products close to the level of fresh beef,

 

 

 

Retail Marketing

About 70% of fresh beef is marketed to consumers through supermarket chains, butcher shops, and open market. The institutional market -primarily restaurants and hotels- take the remainder of the beef.

Supermarkets

Some 60% of fresh beef is sold through supermarkets.[10]  Israel’s three large chains are generally comparable to European or American outlets: wide variety, modern lighting and design, international packaging, large frozen food sections etc. The most striking difference, however, is in the fresh meat section. Every large supermarket has its fresh meat displayed in refrigerated counters in large trays, generally unsliced, and almost never pre-wrapped – an old-fashion butcher shop inside of the supermarket. Customers consult with the butchers at the counter, make their order and wait while the butcher cuts and trims roasts and steaks to order. Supermarket butchers weigh the meat in front of the customer and present the final product either in a stretch-wrapped tray, a plastic carton, or a plastic bag.

Israeli beef is generally leaner than U.S. choice. Israel does not have a grading system that gives preference to marbled cuts. The Israeli consumer is used to lean meat, and apparently requests lean meat from the butcher.

Because of the mix of ethnic backgrounds in Israel, Israeli butchers are adept at preparing various types of cuts for their specific clientele. Some use American cuts and names, more use Argentina or European traditions. Since the major supermarket chains sell only kosher meat, hindquarter cuts are unusual. (Hindquarter cuts can be made kosher only by removing the veins by hand.) Supermarket butchers generally sell both “kashered” (salted) meat as well meat that has been kosher slaughtered but has yet to be soaked in salt to complete the koshering process.

The “fresh from frozen” beef is displayed alongside the fresh beef. The defrosted beef may start the day in its sealed vacuum pack, but the butcher will open the package and sell portions or cut steaks if requested.

Some supermarket butchers also sell “homemade” ready to cook products such as seasoned hamburger patties, skewered meat ready for the grill, net-wrapped rolled roasts, and roasted chickens.

Unwrapped fresh poultry and cuts are also displayed in the butcher’s counter, but poultry products are available pre-wrapped as well.

Beyond the butcher counter, Israeli supermarkets feature a large range of frozen beef and meat products, from simple frozen steaks and hamburgers, to fully made entrees. A wide selection of smoked meats, from poultry and beef,  are available both as sliced to order at a separate “delicatessen” counter, as well as pre-packed chilled and frozen.

Other Retail Outlets

Neighborhood butcher shops move about 25% of Israel’s fresh beef. They are usually found in areas where the frequency of buying is above the average. Since these shops are small and each serves a specific clientele, they tend to vary considerably depending on the area and the make-up of the clients.

Another class of outlets is the upscale delicatessen outlets. There are several delicatessen chains and many independents which sell prepared foods, processed delicacies, and fresh meat. The category is distinguished by the high design standards of the stores, higher price levels, and the fact that many of them are not kosher. These units account for about 5% of beef sales, and are growing.

At the bottom end of the market, open-markets stalls account for 7% of beef sales.

 

Farm level profitability of local beef production

According to the findings reported in farm level studies on feedlot dairy cattle herd bull calves (Institute of Farm Income Research, 2000) and the pasture based beef cattle herd, beef production in Israel has tended to be marginally profitable in recent years. These studies also noted that the profitability of individual production units is influenced by: settlement type, scale of operation, feed ration technology and overall management practices. As such, it is possible to assume that farm level management techniques which can assist in the optimal planning of feedlot production and marketing decisions, and thereby improve the economic efficiency of the enterprise, would be an important consideration to individual beef producers whose objective is profit maximization.

Veterinary Issues

As this report was being prepared, the United States announced the finding of one case of BSE in the U.S. herd.  Some 30 countries, including Israel, have banned the import of U.S. beef, including live cattle. In response, the USDA Food Safety Inspection Service has notified U.S. exporters and international veterinary services that FSIS inspectors are not able to certify that beef shipments are free of BSE. Effectively, international trade in U.S. beef products has stopped.

At the same time, the Israeli and the U.S. veterinary services were already planning discussions relating to the veterinary protocol for import of calves from the U.S to Israel.  A copy of the veterinary protocol for import of live calves that was circulated by Israel in February 2001 is available. U.S. authorities were not able to meet all of the certifications required by the Israel authorities in that protocol, thus no import of feeder calves from the U.S. has taken place.