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The Inefficiencies of Regionalised Trade of Milk Quota

Author

Listed:
  • Thia Hennessy

    (Rural Economy and Development Programme, Teagasc, Athenry, Co. Galway, Ireland)

  • Shailesh Shrestha

    (Rural Economy and Development Programme, Teagasc, Athenry, Co. Galway, Ireland)

  • Laurence Shalloo

    (Dairy Production Research Centre, Teagasc, Moorepark, Co. Cork, Ireland)

  • Michael Wallace

Abstract

This paper estimates the inefficiencies associated with the regionalisation of milk quota trade. An optimisation model is developed to estimate the economic value of quota. Quota values are aggregated to derive supply and demand curves under two scenarios; first where quotas can trade nationally and second where the trade of quota is regionally restricted. Quota trade is simulated and the consequent effects on supplier structure are estimated. Through the derivation of sectoral cumulative cost curves it is possible to estimate the impact of regionalising quota trade on sector efficiency. The model is solved using National Farm Survey data from Ireland and the inefficiencies of regionalised quota trade in Ireland is estimated at €20 million. The model is also used to quantify the effect of policy uncertainty on quota trade. The implications of an early abolition or expansion of the EU milk quota on quota trade is quantified. The paper concludes by discussing the implications of restricted quota trade, especially in the context of eventual quota removal.

Suggested Citation

  • Thia Hennessy & Shailesh Shrestha & Laurence Shalloo & Michael Wallace, 2008. "The Inefficiencies of Regionalised Trade of Milk Quota," Working Papers 0811, Rural Economy and Development Programme,Teagasc.
    • Handle: RePEc:tea:wpaper:0811
    as

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    File URL: http://www.teagasc.ie/rural-economy/downloads/workingpapers/08wpre11.pdf
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    References listed on IDEAS

    as
    1. Alston, Julian M., 1981. "A Note on the Effects of Non-Transferable Quotas on Supply Functions," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 49(03), pages 1-9, December.
    2. Boots, Maroeska & Oude Lansink, Alfons & Peerlings, Jack, 1997. "Efficiency Loss Due to Distortions in Dutch Milk Quota Trade," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 24(1), pages 31-46.
    3. Antonio Alvarez & Carlos Arias & Luis Orea, 2006. "Explaining Differences in Milk Quota Values: The Role of Economic Efficiency," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 182-193.
    4. David Colman & Michael Burton & Dan Rigby & Jeremy Franks, 2002. "Structural Change and Policy Reform in the UK Dairy Sector," Journal of Agricultural Economics, Wiley Blackwell, vol. 53(3), pages 645-663, November.
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    Cited by:

    1. Hennessy, Thia & Lapple, Doris & Shalloo, Laurence & Wallace, Michael, 2012. "An economic analysis of the Irish milk quota exchange scheme," International Journal of Agricultural Management, Institute of Agricultural Management, vol. 1(3), pages 1-9.

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