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Climate changes, associated with accumulation of greenhouse gases, are expected to have a profound influence on agricultural sustainability in Israel, a semi-arid area characterized by a cold wet winter and a dry warm summer. Accordingly this study explored economic aspects of agricultural production under projected climate-change scenarios by the "production function" approach, as applied to two representative crops: wheat, as the major crop grown in Israel’s dry southern region, and cotton, representing the more humid climate in the north. Adjusting outputs of the global climate model HadCM3 to the specific research locations, we generated projections for 2070-2100 temperatures and precipitations for two climate change scenarios. Results for wheat vary among climate scenarios; net revenues become negative under the severe scenario (change from -145 to -273%), but may increase under the moderate one (-43 to +35%), depending on nitrogen applied to the crop. Distribution of rain events was found to play a major role in determining yields. By contrast, under both scenarios cotton experiences a considerable decrease in yield with significant economic losses (-240 and -173% in A2 and B2 scenarios, respectively). Additional irrigation and nitrogen may reduce farming losses, unlike changes in seeding dates.