Adjustments to Changing Economic Conditions in Norwegian Dairy Farming

LP models of Norwegian dairy farms are designed to evaluate the impact of changes in prices and subsidies on production systems and on profitability at the farm level. At 1999-prices, producing a fixed milk quota with low to moderate yielding cows (6000 to 6600 kg milk annually) is most profitable. Silage offered ad libitum is profitable. A three cut harvesting system is more profitable than two cuts. Changes in the milk price have no effects on production. If forage crops is the only possible land use, increased area payments have no effects on production. If non-forage crops are also grown, increased area payments for forage crops result in a higher proportion of the land being used for temporary grass (ley) and in cheaper forage, making higher silage intake per cow profitable. Higher intake of silage achieved through supplementing less concentrates, results in lower milk yield per cow. By increasing headage payments, milk yield falls, as it is optimal to have more cows to produce the same quota output. Reduced product and concentrate prices combined with higher area and headage payments result in more cows and lower yields. Silage offered in a fixed ration is the most profitable option and the level of concentrates per cow is high. More land is then used for permanent pastures and less for non-forage.