Agrexco Liquidation: An Obituary for a Company Relying on Cheap Water

agrexco produceAgrexco’s image  of produce may now be gone forever

Israel’s agricultural feats have often hailed as a modern miracle in the water deprived Middle East. This “miracle” pumped up with state-subsidized water is now having to face the realities of global warming and climate change, even though the Israeli public have been  supporting strong action on climate change for several years. Perhaps the most outstanding recent example of how the current realities of climate change are affecting the country’s agricultural progress, is the recent news that Israel’s well known agricultural exporting consortium Agrexco is now bankrupt and faced with liquidation as reported in The Marker financial paper .

The article was written to sound more like an obituary for the export company, which has been in existence since 1956. The final liquidation of Agrexco, now set to take place on September 11, is due to Agrexco incurring massive debts of more than NIS 160 million ($46 million USD) which prevents its from continuing in operation, according to the Tel Aviv District Court, which has now ordered Agrexco’s court-appointed manager to change from trying to  run the company to liquidating it to satisfy debts owed to creditors.

According to the Bankruptcy Court’s judge Varda Alshech:

“Agrexco reached the ‘operating table’ of the court’s protection against creditors very late, already in critical condition.  From the revelations during the stay of proceedings, the depth and scope of the pathology that metastasized into almost every limb and organ of the company became clear. It had invested massively in ships, which contributed a great deal to the company’s drowning in the deep sea of bankruptcy”.

The judge added that the company’s structure was wasteful and inefficient. Its business concepts were flawed, leading to complex legal problems.

Agrexco, like many Israeli public companies that had been heavily protected and subsidized by earlier Labor Party-led governments dating back to the early days of the state’s creation, had to face new realities when later governments began to give less financial backing to them with the idea that these companies now have to function on their own. Judge Alshech expressed her criticism toward the present  Israeli government for not doing more to help save the company, which like the country’s El Al national airline company and Zim shipping company has been a household name as far as being on the minds of the general public.

If one were to look into some of other reasons for Agrexco’s demise, other than a “wasteful and inefficient business structure with flawed business concepts” there are also a number of other issues that had a serious effect on the company and on Israeli agricultural exports in general.

These issues include a worsening water crises in Israel and other parts of the Middle East and changing  political realities between Israel and  the European Union (Israel’s largest agricultural export market).

These “political realities” have worsened substantially since the beginning of the present Likud Party government, led by Prime Minister Binyamin Netanyahu, came to power in March, 2009.  Regarding the water issues facing Israel and neighboring countries in the Middle East, the future of water supplies in the region were the subject of a conference held in May of 2010 by the Strategic Foresight Group at a West Aisia –North Africa Forum (WANA) held in Amman Jordan to discuss water issues affecting the entire region.

Israel recycles up to 70 percent of its waste water, much of which is allocated to agricultural use.  There is also an increasing use of desalination to create fresh water supplies. Despite these efforts, Israel’s agricultural sector, which has long benefited from low water rates due to government subsidies, is not receiving enough water to grow the water intensive produce like cotton, bananas, and tropical and seasonal fruit that have been some of the mainstays of its agricultural export market.

This, along with increasing competition from North African countries and worsening political relations with the EU have helped to contribute to Agrexco’s current state of lying under the bankruptcy court’s liquidation scalpel.

Photo via Wikihow

Read more on Middle East water and climate change issues:
Strategic Foresight Group’s Forecast for Water in the Middle East
Egypt Builds Climate Change Plan for Cairo and Nile Delta
Israeli Public Supports Strong Action on Climate Change
Analyzing the Water Crises in Israel, Jordan and Beyond

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One thought on “Agrexco Liquidation: An Obituary for a Company Relying on Cheap Water”

  1. allois says:

    Agrexco was such a reputable company. Hope they are able to turn round their fortunes

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