Dairy Farms without Quotas: Simulations Based on a Multi-output Multi-input Cost Function
AbstractThis paper evaluates the farm level supply and income effects from removing milk quotas and reducing producer prices with increasing direct compensatory payments. Using a panel of Belgian dairy farms, we first estimate long-run flexible multioutput multi-input marginal cost curves for each farm of the sample. Second, we embed each estimated long-run farm cost function in the objective function of a profit maximisation programming model built for each farm of the sample. Simulations show that, without quotas, aggregated milk supply and farm gross margin increase by 18 per cent and 37 per cent respectively from their reference level. A 20 per cent decline in producer prices and a compensation rate set at 30 per cent of the price decline maintain the aggregated milk supply and farm gross margin at their reference level. Dairy farms adjust differently to change in prices and compensation rates.
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Bibliographic InfoPaper provided by European Association of Agricultural Economists in its series 2008 International Congress, August 26-29, 2008, Ghent, Belgium with number 43965.
Date of creation: 2008
Date of revision:
flexible cost function; microsimulation; dairy reform; Livestock Production/Industries;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-25 (All new papers)
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