Investigating the Effects of Climate Change on the Agricultural Market

Climate change is an irreversible change in average climate. This phenomenon has a wide temporal and spatial range and, consequently, has a major impact on various economic sectors including water and agriculture. Economic implications of climate change affect water resources, taking into account opportunity costs and benefits of allocating and storing water resources during climate change. In order to achieve this goal, considering sensitive climate conditions in arid regions and multiple consequences of climate change in these areas, this study aimed to investigate economic effects of climate change and water deficiency in arid regions on the production, price and income of the agricultural sector in Iran.

  For this purpose, the present study used an Agricultural Multi-market Model (AMM) that is superior to other methods because of its endogenous price considerations. It is also designed for agriculture with high geographical distribution (Ponce et al., 2014). The core of the AMM consists of two sets of equations. The first set depicts the behavior of agricultural producers (supply) and the second set depicts a picture of consumer behavior (demand).

The results showed a potential decrease as a result of climate change in the area under cultivation of maize crop under warm, cold and dry climates, as well as in barley, rainfed wheat and wheat under warm, cold and dry climates until 2025. The results also showed that with climate change, a decrease would be observed in maize crop production in hot dry, cold dry and temperate dry sub-climates as well as in wheat and rainfed wheat in temperate dry sub-climates until 2025, as compared to 2016. Wheat, barley and maize crops would also increase under hot, cold and temperate climates until 2025 compared to 2016. Climate change is projected to increase farmers' income in hot, cold, and temperate sub-climates. Moreover, the results revealed that with climate change, net exports of wheat, barley and maize would remain negative for 2025 and the country would remain an importer of these agricultural products.

According to the results, the average price of agricultural products would increase for the sub-climates by increasing climate change. Since products under consideration are inelastic commodities, it is emphasized that a price protection policy should be adopted to increase the consumer purchase power. The results showed that the temperature response coefficient is more for wheat, rainfed wheat and barley in warm and dry sub-climates, for rainfed wheat, barley and rainfed crops in cold dry climate and for rainfed barley in dry temperate climate, as compared to rainfall. Therefore, it is necessary to increase the cultivation level of these products in the above sub-climates.