Response of near-optimal agricultural production to water policies

The paper presents a study triggered by water policies, imposed by the Israel Water Commissioner on agriculture to cope with a shortage of water. Those policies were a combination of price policies and quantity restrictions. We analyze them for the case of the Jezreel Valley district, using a deterministic linear programming optimizing model. The optimal solution finds the mix of crops that maximizes the net income of the district. The results show that a mixture of policies to attain a single end is not efficient and can have unintended side effects. In particular, when water quotas are binding, raising water prices does not increase water productivity and merely places a tax on farmers. The response of Jezreel Valley agricultural to water quota policy is affected significantly by the presence of unirrigated winter crops as an alternative to water-using crops. The model provides a useful decision-support tool for analyzing water policies.