The relevant part of the Merneptah stela, according to http://www.mystae.com/restricted/streams/thera/stela.html (the first site I happened to find), reads...
While the Merneptah stele (which is usually now dated to c. 1207 BCE) is certainly significant, it does NOT really "prove" any of the biblical story. It speaks of the Pharaoh "destroying" Israel WITHIN the land of Canaan. This is, of course, an exaggeration, but the text does NOT mention the Israelites in Egypt or the Exodus, and the Bible makes NO mention of any battles between Israelites and Egyptians within Canaan. So while the stele does "prove" the existence of a people called "Israel", living within Canaan at the end of the 13th century, it actually contradicts the "main line" of biblical history.
Israel is desolated, his seed is not;And, if I remember correctly, the hieroglyphs for "seed" include a determiner for agricultural produce, not for a nation. So the meaning would appear to be that Merneptah was claiming to have destroyed Israel's grain store, not to have destroyed the nation.
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