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Organic or conventional? Optimal dairy farming technology under the EU milk quota system and organic subsidies

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  • Breustedt, Gunnar
  • Latacz-Lohmann, Uwe
  • Tiedemann, Torben

Abstract

This paper assesses the competitiveness of organic and conventional dairy farms under different milk market and organic farming policy scenarios. We use a DEA-based model to estimate for each policy scenario the sample farms' profit potential in both technologies. The model enables identification of a farm's optimal technology based on its input-output observations. The empirical analysis is based on the annual accounts of 1300 Bavarian dairy farms. Results indicate that approximately 69% (78%) of the organic (conventional) farms have chosen their optimal farming system. The remaining organic (conventional) farmers could increase their profit on average by roughly 6% (10%) by switching to the other technology. Abolishment of the EU milk quota results in a considerable decline in the number of sample farms for which organic farming is the optimal technology, suggesting that, ceteris paribus, organic dairy farms may lose competitive advantage with the deregulation of the EU's milk market regime in 2015. Organic maintenance payments more than double the number of farms with a higher earning potential in organic farming, but their effectiveness could decline when the milk quota is abolished.

Suggested Citation

  • Breustedt, Gunnar & Latacz-Lohmann, Uwe & Tiedemann, Torben, 2011. "Organic or conventional? Optimal dairy farming technology under the EU milk quota system and organic subsidies," Food Policy, Elsevier, vol. 36(2), pages 223-229, April.
  • Handle: RePEc:eee:jfpoli:v:36:y:2011:i:2:p:223-229
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Nadine Würriehausen & Rico Ihle & Sebastian Lakner, 2015. "Price relationships between qualitatively differentiated agricultural products: organic and conventional wheat in Germany," Agricultural Economics, International Association of Agricultural Economists, vol. 46(2), pages 195-209, March.
    2. Ang, Frederic & Oude Lansink, Alfons, 2014. "Dynamic profit inefficiency: a DEA application to Belgian dairy farms," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182649, European Association of Agricultural Economists.
    3. repec:oup:erevae:v:45:y:2018:i:1:p:81-99. is not listed on IDEAS
    4. Stranieri, S. & Ricci, E. & Banterle, A., 2016. "The Theory of Planned Behaviour and Food Choices: The Case of Sustainable pre-packed Salad," 2016 International European Forum (151st EAAE Seminar), February 15-19, 2016, Innsbruck-Igls, Austria 244475, International European Forum on System Dynamics and Innovation in Food Networks.
    5. repec:gam:jsusta:v:10:y:2018:i:4:p:1304-:d:142759 is not listed on IDEAS
    6. Nehring, Richard & Sauer, Johannes & Gillespie, Jeffrey & Hallahan, Charlie, 2016. "United States and European Union Dairy Farms: Where Is the Competitive Edge?," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 0(Special I), pages 1-22, August.
    7. Mercedes Beltrán & Ernest Reig, 2014. "Comparing conventional and organic citrus grower efficiency in Spain," Working Papers 1406, Department of Applied Economics II, Universidad de Valencia.
    8. Wettemann, Patrick Johannes Christopher & Latacz-Lohmann, Uwe, 2017. "An efficiency-based concept to assess potential cost and greenhouse gas savings on German dairy farms," Agricultural Systems, Elsevier, vol. 152(C), pages 27-37.
    9. repec:eee:ecolec:v:150:y:2018:i:c:p:307-314 is not listed on IDEAS

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