Iddo Kan and Ayal Kimhi* - UNU-WIDER Kimhi.pdf · –Why is Israeli agriculture a good case study?...
Transcript of Iddo Kan and Ayal Kimhi* - UNU-WIDER Kimhi.pdf · –Why is Israeli agriculture a good case study?...
Climate Change, Agricultural Adaptation, and Food Prices: A Partial Equilibrium Approach using Micro Data
Iddo Kan and Ayal Kimhi*
* Authors are affiliated with the Department of Agricultural Economics and Management, the Robert H. Smith Faculty of Agriculture, Food and Environment, The Hebrew University, and with the Center for Agricultural Economic Research.
* Kimhi is currently visiting at the Research Institute for Humanity and Nature (RIHN) in Kyoto, Japan.
Helsinki, September 28th, 2012
Structure of presentation
• Methodological approach • Application to Israeli agriculture
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Modeling farm responses to climate change
• Production approach: experimental or empirical effects of climate change on yields
• Ricardian approach: empirical effects of climate change on farm profits or land values
• Integrated approach: empirical effects of climate change on farmers’ decisions feeding into market equilibrium changes that in turn affect farmers’ decisions.
3
How will climate change affect agriculture?
• Direct effect: Farmers will alter their crop portfolios
• Indirect effect: crop prices will change as a result of the changes in supply, and this will lead to further changes in crop portfolios
• New equilibrium: these effects feed into each other until convergence
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Previous research and our contribution
• Kaminski et al. (AJAE, forthcoming): A structural model of regional land allocation among crop-technology bundles
• Our contribution: – Adding the market equilibrium component – Estimating land allocations at village level – Allowing for corner solutions in land allocation
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Analysis Flowchart Production
factors
Village-level crop portfolio and land allocation model
Climate factors
Nationwide demand
Demand elasticities
Value of local production and imports
Output prices
Consumer surplus
Nationwide production
Nationwide partial equilibrium
Structure of presentation
• Methodological approach • Application to Israeli agriculture
–Why is Israeli agriculture a good case study?
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<0 0-300
300-600
600-1200
Jordan Valley
Coastal Plain
Mountain Range
Altitude 135 km
22,000 km2
Sea of Galilee N 470km
Mediterranean Sea
8
Dead Sea
Red Sea
SEASONS
Rainy Winter November-March
Dry Summer June -August
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Semi Arid
Arid
50 mm
1,200 mm
Sub Tropic
Egypt
Lebanon
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Varied climate conditions, topography and soil types stimulate the development of unique agricultural technologies Climate : Subtropical to Arid Topography : - 408m to 1,208m Soil : Sand dunes to Heavy Loam
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Value of agricultural production (2010)
2% of Net Domestic Product 12
Climate Change Forecast for Israel
100
200
300
400
500
600
700
1970 1980 1990 2000 2010 2020 2030 2040 2050 2060
mm/year
Year
Precipitation
8
10
12
14
16
18
20
22
24
26
28
30
32
1970 1980 1990 2000 2010 2020 2030 2040 2050 2060
C o
Year
Temperature January April July October Average
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Previous research on Israel
• Kan et al. (2007) – Mathematical programming applied to regional data – 20% decrease in net farm revenues by 2100
• Fleischer et al. (2008) – Ricardian approach applied to farm-level data – Moderate climate change beneficial but extreme
changes harmful • Kaminski et al. (forthcoming)
– structural land allocation model applied to regional data from Israel
– Up to 10% decrease in aggregate farm profits by 2060
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Data • 1992-2002 annual data from 793 communities • 7 crop-technology bundles:
– Irrigated field crops – Rain-fed field crops – Open-field vegetables – Covered vegetables – Deciduous fruits – Subtropical fruits – Citrus and other fruits
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Egypt
Lebanon
Agricultural communities
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Crop portfolios
Activity Fraction of
growers All sample (dunam)
Per-grower (dunam)
_______________________________________________________________________________________________________________
Vegetables, covered 27% 27 101
Vegetables, open field 73% 804 1,105
Field crops, irrigated 56% 879 1,573
Field crops, rain-fed 65% 1,319 2,016
Deciduous fruits 36% 123 338
Subtropical fruits 63% 174 274
Citrus & other fruits 82% 421 513 17
Climate data Precipitation mm/year 395.1 Precipitation S.D. mm/year 121.6 Degree days - January Co 145.1 Degree days –April Co 328.7 Degree days – July Co 576.9 Degree days – October Co 441.3 Degree days – inter-annual S.D. Co 198.9 Degree days – intra-annual S.D. Co 5.6 Degree days above 34 Co Co 0.46 Degree days below 8 Co Co 6.4
18
Crop price indices
19
40
50
60
70
80
90
100
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Field crops Vegetables Citrus Other fruits
Climate variables coefficients
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Variable Vegetables Covered
Vegetables Open field
Field crops Irrigated
Field crops Rain-fed Deciduous Subtropic.
Citrus & Other
Precipitation -1.543** 19.69*** 9.21*** 8.715** 7.759*** -0.532 -17.73***
Precipitation S.D. 6.897*** -32.65*** -14.87** -72.07*** -18.93*** 7.521*** 51.98***
Deg. days - Jan. -8.232*** 15.13** -8.701 11.73 -2.736 -9.753*** 9.341**
Deg. days –April -0.242 58.61*** 34.44*** -16.03* 25.55*** -0.730 -7.721**
Deg. days – July 30.52*** 49.3*** 42.58*** 50.58*** -18.89*** -9.886*** 12.81**
Deg. days – October -10.69*** -17.93* -37.23*** -4.802 -43.71*** 27.49*** 11.36*
DD - inter ann. S.D. 2.99* 1.229 11.33** 82.05*** 17.76*** -8.067*** 2.681
DD - intra ann. S.D. -1552*** -920 -2796*** -1851** -1852*** 419.4*** 917.8***
DD above 34Co 61.83** -476.6*** -885.5*** -1190*** 152.3*** 221.2*** -472.8***
DD below 8Co -5.118** 20.54*** 27.02*** -34.04*** 14.61*** -1.568 5.705*
100
200
300
400
500
Precipitation by climate Periods
1981-2000 2001-2020 2021-2040 2041-2060
600
700
1970 1980 1990 2000 2010 2020 2030 2040 2050 2060
mm/year
Year
Climate Change Relative to 1981-2000 (%)
- 20 0
20 40 60 80
100 120 140 160
2001 - 2020
2021 - 2040
2041 - 2060
- 100 - 80 - 60 - 40 - 20
0 20 40 60 80
100 120 140 160
Demand functions
0
0.5
1
1.5
2
2.5
3
3.5
0 0.5 1 1.5 2
Price Index
Quantity Index
Field crops
International price
Forecasted price indices
80
90
100
110
120
130
140
150
160
1981-2000 2001-2020 2021-2040 2041-2060
Field Crops Fruits Vegetables
Vegetables Vegetables Vegetables
Fruits Fruits
Fruits
25
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Citrus & other plantations Sub tropic plantations Deciduous Field crops, rainfed Field crops, irrigates Vegetables, open space Vegetables, covered
Forecasted land allocations
1981 - 2000
Baseline
2001- 2020
2021- 2040
2041- 2060
Fixed prices
2001- 2020
2021- 2040
2041- 2060
Partial equilibria
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0
20
40
60
80
100
120
140
1981-2000 2001-2020 2021-2040 2041-2060 2001-2020 2021-2040 2041-2060
Quantity Index of Total Production
Baseline Fixed prices Partial equilibria
27
0
1
2
3
4
5
6
7
8
9
1981-2000 2001-2020 2021-2040 2041-2060 2001-2020 2021-2040 2041-2060
Value of Total Production (million NIS)
Baseline Fixed prices Partial equilibria
28
0
1
2
3
4
5
6
7
1981-2000 2001-2020 2021-2040 2041-2060
Production
Imports
Production Production Production
Imports Imports
Value of Production, Imports and Consumption under partial equilibria (million NIS)
Summary
• Climate change is expected to bring about considerable changes in Israeli agriculture
• Ignoring price changes may lead to erroneous production expectations
• Our methodology takes into account: – Effects of price changes – Changes in crop portfolios at the farm
level, including corner solutions 29
Wastewater recycling
30 Source: Lavee and Ash (forthcoming)
0
500
1,000
1,500
2,000
2,500
3,000
1960 1970 1980 1990 2000 2010 2020 2030
Desalinated
Recycled
Natural
Water sources (million m3)
Source: Yoav Kislev, Taub Center (2012)
32 Source: Modified from Yoav Kislev, “Water Pricing” (2010) and Taub Center (2012)
Water prices and direct costs water for agriculture (in $US/CM, 2010 prices)
0.00
0.10
0.20
0.30
0.40
0.50
0.60
1950 1960 1970 1980 1990 2000 2010
Price
Cost