There are sixteen feed mills in Palestine with a total capacity of about 25000 tons per month, as well as three others under construction with a total capacity of 5500 tons monthly. However, despite the expansion in feed milling, Israeli feed-mills still dominate the local market. This study aimed to examine the reasons for this, and the potential of the local feed industry in the context of open regional trade. Palestinian feed mills vary considerably in their production capacity and in the type of machinery used. In many cases, however, il is observed that feed mills purchased used machinery procured from the Israeli factories. This may have important consequences for the productivity of these mills and their cost structure as well as the quality of manufactured feed. Owners of local feed mills rationalize this by pointing to their very limited financial resources, and the small size of the domestic markets. • Another important point in this context is that local feed mills import all their raw materials from foreign sources, but their storage capacity is noticeably limited (around 9000 tons), again on account of their weak financial base. This has added to their production cost and severely under minded competitiveness vis-a-vis Israeli manufacturers. The aggregate demand for various types of livestock feed as of early 1999 is estimated at 25000 tons per month (17000 tones for the West Dank and 8000 tons for the Gaza Strip). In addition, the consumption of barley is estimated at about 8000 tons per month. Local feed mills currently produce about I 1000 tons per month, which accounts for only 25% of poultry feed and 55% of other livestock feed. This study examined the reasons for the low share of local feed mills, and came up with the following factors.