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Capitalization of Farm Policy Benefits and the Rate of Return to Policy-Created Assets: Evidence from California Dairy Quota

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  • Daniel A. Sumner
  • Norbert L. W. Wilson

Abstract

The rate of return to ownership of California dairy quota is about 27% per year—well above that of typical financial assets, but in line with other measured returns to agricultural quotas. Ownership of dairy quota does not contribute positively to total variation of typical portfolios, including those of dairy farm assets, and so contributes little or no portfolio risk. A plausible alternative hypothesis for the high rate of return is that quota owners see significant risk of policy change that would reduce future quota values. That is, they face default risk in quota ownership. Copyright 2005, Oxford University Press.

Suggested Citation

  • Daniel A. Sumner & Norbert L. W. Wilson, 2005. "Capitalization of Farm Policy Benefits and the Rate of Return to Policy-Created Assets: Evidence from California Dairy Quota," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 27(2), pages 245-258.
    • Handle: RePEc:oup:revage:v:27:y:2005:i:2:p:245-258
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    File URL: http://hdl.handle.net/10.1111/j.1467-9353.2005.00224.x
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    1. Richard R. Barichello & James Vercammen & Benjamin Zammit‐Maempel, 2024. "Are milk quota prices a rational investment? Modeling quotas as financial assets," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 72(3), pages 251-269, September.

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