 So thanks for coming to this session. This is a joint paper with my colleague Ido Kan, we're both at the Hebrew University at the Department of Agriculture, Economics and Management. I'm currently visiting the Rien Institute in Japan, Research Institute for Humanity and Nature. And actually they encourage me to go back to this project which is somewhat dormant for a couple of years and this conference came at the right time so everything is perfect. The paper is not completely ready yet but I think we accomplished quite a lot of it. So what we're going to do in this paper is look at climate change and how it affects the agricultural sector but mostly through farmers' behaviour. And we allow farmers' behaviour to then affect the supply of agricultural sector and then supply effect feeds back into an equilibrium model that will change the prices and then farmers see different prices and react again so there's kind of a circle of action that goes from farmers to prices until you get a new equilibrium. Now this is not a general equilibrium model, we only look at the agricultural sector so we only look at fresh produce market and assume that the rest of the economy is not affected and the paper there is some discussion about the reasons for this assumption. So let me start by talking a little bit about the methodology that we use and how it is placed in the general literature on this topic and then I will move to the application to the Israeli agriculture. So in terms of how the literature developed with modelling climate change, the earlier attempts have been classified as production approach which is maybe using laboratory experiments or some other observations to realise how yields, for example, are affected by climate change and the previous presentation perhaps was a good example of this kind of literature and of course now it is expanded and people are using this in the context of general equilibrium model but this approach was criticised by the recording approach by saying that farmers actually mitigate some of these changes by changing their behaviour so the recording approach would say let's look at farmers' behaviour and how it affects output or profits or land values so the recording approach in fact looks at the opposite direction where they don't model farmers' decisions but they look at the final outcome and the final outcome is the profits but then of course it cannot be used to tell anything about the supply of agricultural products or prices or anything like that all I can tell is whether farmers benefit from climate change or not and to what extent now the integrated approach is trying to put everything together both looking at the effect of climate change on agricultural outcomes but also taking into account farmers' behaviour and also taking into account the market approach the market clearing situation in which prices respond to the changes in supply and this is where our methodology fits and so in particular we will look at the direct and indirect effect of climate change on agriculture first of all there's the direct effect farmers see that the climate or some indicators of climate are changing and they're changing their behaviour in our case we model the crop mix what crops are they cultivating and how they allocate the land between the crops between those crops and then of course this will affect the aggregate supply and this will affect the market price of these crops and then this feedbacks into the farmers decision and that ends in the new equilibrium so the literature that we look at is perhaps it's based on an earlier paper by several of my colleagues that is forthcoming in the American Journal of Agriculture Economics they used the structural model to look at farmers' crop land location as a response to climate change it was the regional data that they used so they looked at the Israeli data and differentiated by regions and what we do is actually go back to this approach but change it in several directions first of all we add the market part of it so we look at how prices change second we go to a more desegregated level we don't look at regions we look at villages we would like to look at household level or farm level data but we don't have enough data we look at villages and see to what extent the crop land allocation is changing within the village and in this context we have to add the corner solutions because not all of the crops are grown in all of the villages so we look at also what crops do you choose to grow and also how do you allocate the land between the crops that you choose to grow so the general structure of the model is like that if you look here that's the farm decision level and it's made according to the climate factors to the output prices and to other production factors and once you have the farmers' decisions that is aggregated to get the market supply and then the market supply and the market demand interact in an equilibrium model that results in new prices that feed back into the farmers' decision and for the demand side we use elasticities that were found in a different project that looked at demand for fruits and vegetables and this is how we get the demand and you can go further with that and estimate even the changes in consumer surplus and so forth so now going to the Israeli example and first of all I want to tell you why it is Israel is an appropriate case study for studying this phenomena well Israel is a very small country but quite diversified in many aspects one is the topography, we have the coastal plain that is perhaps the most fertile part of the country including perhaps the northern valleys but it's also the most urbanized so agriculture is slowly moving to other parts of the country actually to the south and to the eastern valleys the eastern valleys enjoy temperatures that allow them to grow vegetables and the flowers to be sold in Europe during the winter they can get very good prices for that of course there is a problem of the climate and there is a problem of the soil and there is a problem of water but technology is able to overcome some of these problems but in any case we have very diverse conditions for agriculture we have a short rainy season and a long dry summer so that also implies some restrictions on cultivation and we have a lot of variation of precipitation in the north we could go up to 1200 mm per year and in the south it's almost nothing so all together we have the topography and the precipitation and the soil types that I haven't mentioned but also vary quite a lot and you get a very diversified agriculture sector within a very small region so unlike Brazil that you can look at regions here and there and they can be affected differently by climate in Israel it's a small place but still highly diversified so what you can do is you can say well if climate changes and now the conditions in the north are going to be the same as or not now but in 20 years the conditions in the north are going to be the same as now in the south then you can say okay let's take a typical farm in the south and everything else equal you can say that the farmer in the north will adopt the same cultivation practices and still be in the same region so no other things are changing in terms of the crop portfolio about a quarter of agriculture production is vegetables another quarter is fruit these two are exported in part mostly to Europe we have about 35% of livestock products that are mostly for domestic production and we have some field crops not a lot we import most of our grains and some flowers and some other niche markets that we use these are the forecasts of climate change for Israel in particular it's part of a larger eastern Mediterranean climate change forecast and as you can see the temperature on the right are expected to rise precipitation is expected to fall but with some variability over the years I'll go back to this later now the temperature could bring some benefits because if we now grow vegetables in the south and sell to Europe in the winter perhaps in the future we can do that also in the north but then precipitation is going to be a problem because Israel is highly irrigated but the irrigation is coming from underground sources that need to be replenished so a previous research I presented one paper but there's one paper in 2007 that looks like a macro level and predicted that by 2100 year 2100 farm revenues will decrease by 20% because of climate change later paper in 2008 used a regarding approach and found some more moderate changes will be beneficial but more extreme will be harmful for agriculture and then the recent paper that I mentioned that is forthcoming also saw that there are some negative impacts on agriculture so the data that we have are annual data from 793 communities that's almost all agriculture communities in Israel we divided into the production to 7 crop technology bundles so we first divide the crops into field crops, vegetables and fruits and then we divide each of them to field crops to irrigated and rain fed vegetables to open field and covered and fruits to 3 types of fruits this is the distribution of these communities across the country I have to go a little faster now because of time constraints so these are the data just showing not all crops are cultivated in all villages so we have to take care of these corner solutions most of the land is still going to a field crop although the yield is quite low and the profitability is quite low but the water constraint and other constraint dictate this and this is also going to be affected by climate change the climate data that we use is first of all precipitation and its variability over the years and then degree days format, degree days is the number of degrees between 8 and 34 that you accumulate over a certain period in this case a month and then we also look at extreme days days with more than 34 degrees and days below 8 degrees and these are going to affect different crops differentially crop prices these are the index price index over the sample years normally the trend is downwards but there is some variability and differences between the different 4 series that we have some of the estimation results we use the multivariate toe bit for these 7 equations with all the correlations correlations are significant so it's important to account for them and to account for the corner solutions I'm not going to go into these just showing that the climate coefficients are mostly significant and you can see different signs so because the land is given so the crop is going down another crop will go up different signs so there is an effect of climate on farmers decisions now we simulate the model and use also the demand side to simulate the prices so we divide the sample this is the precipitation just to show you we divide the sample into 4 periods the green one is the the base period and then 3 simulated future periods and as you can see in the second period we have a decrease in precipitation and then we have a decrease in precipitation that's going to affect the prices this is how the climate variables change across the 4 different periods and as you can see the most extreme changes percentage wise is with the extreme temperatures above 34 and below 8 and this is going to have a major effect on the results demand functions just a schematic picture of demand functions where field crops are normalized to be one and are kept as one because we import field crops so that's not going to be affected by local production and then we put a maximum price increase of 50% because we say if a certain price increases more than 50% we're going to import this from outside this is kind of arbitrary but we're going to check this sensitivity or the results to this constraint so these are the forecasted prices the vegetable is expected to rise to the maximum 50% that we allow so we assume that in the future Israel is going to import vegetables rather than export there's also some increase in the price of fruit but not as extreme although we have these individual crops and some of these prices are going to reach the 50% so some of these fruits we're going to import but on average fruits are going to be still produced in Israel these are the land allocation predictions we compare the equilibrium model to a static model in which prices do not change and as you can see in the static model this is the this part of the model you see not a lot of changes we see some increase in vegetables some decrease in field crops but when you look at the equilibrium predictions it's a totally different story we see a large decline in the cultivation of vegetables and an increase in the cultivation of land allocated to field crops so there's a big difference between a model which that keeps the prices fixed and a model that allows the prices to change in an equilibrium sense so just some aggregate production statistics as you see in the static model production is supposed to increase and the equilibrium model production is expected to decrease and now my time is up so just to show you that because of the decrease in production we're going to import some fruits and vegetables but still the quantity or the value of production and import is going to decrease slightly over the years so consumers are going to pay a double price I mean they're going to pay higher prices for the fruits and vegetables and also the quantity or consumed will go down so that's a major effect on welfare so to summarize our findings indicate and as I said this paper is not complete we're going to go back to the empirical part and try to fine tune it but there seems to be a considerable effect on climate change on agriculture in Israel and if we ignore the equilibrium effect of supply on prices and the feedback effect on supply we're going to get very different expectations and our methodology is building on the existing studies by adding this price effect and also by looking at a more disaggregated study in which you look at village level rather than on regional level and that's our contribution thank you very much