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EU Dairy Quota Reform – AGMEMOD Scenario Analysis

Author

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  • Chantreuil, Frederic
  • Donnellan, Trevor
  • van Leeuwen, Myrna
  • Salamon, Petra
  • Tabeau, Andrzej A.
  • Bartova, Lubica

Abstract

This study provides an in-depth model based quantitative analysis of the implications of the dairy policy reform on the milk and dairy market as well as on other agricultural markets in the EU27, EU15, EU12 and the individual MS. The objectives of the study are threefold: 1. to assess the implications of changing policy and market conditions on EU agriculture with special emphasis on milk quota phasing out and export subsidy removal by using a modelling tool; 2. to carry out policy relevant scenarios reflecting deregulation (e.g. quota abolition), changes in quota and price levels, different types and levels of direct payments; and 3. to analyse the implications of policy reform scenarios and to draw appropriate policy recommendations. Based on an overview of the existing approaches used to analyse the dairy market, the necessary adjustments to the AGMEMOD model are developed. Projections are made under a baseline of no policy change for a time horizon of 10 years for selected individual MS, the EU15 in aggregate, EU12 in aggregate (12 MS from May 2004), and the EU27 in aggregate. This baseline is contrasted with a series of scenarios which involve an increase and eventual elimination of the EU milk quota. The increase in EU milk production under the scenarios is smaller than the increase in milk quota. Milk quota rents fall to zero relatively quickly due to rising input costs and falling milk prices. However, the milk price path under the scenarios is not hugely different to that of the baseline, so it can be said that the general international market conditions in dairy and animal feed are the main drivers of the observed outcomes. In some MS, expansion potential is quite strong and in such cases production continues to expand even after quotas are removed in those scenarios which involve a larger milk quota expansion in advance of its elimination.

Suggested Citation

  • Chantreuil, Frederic & Donnellan, Trevor & van Leeuwen, Myrna & Salamon, Petra & Tabeau, Andrzej A. & Bartova, Lubica, 2008. "EU Dairy Quota Reform – AGMEMOD Scenario Analysis," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 43655, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae08:43655
    DOI: 10.22004/ag.econ.43655
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    1. Tabeau, Andrzej & van Leeuwen, Myrna, 2005. "Consequences of 2003 CAP Reform for Dutch Agriculture," 89th Seminar, February 2-5, 2005, Parma, Italy 239279, European Association of Agricultural Economists.
    2. Esposti, Roberto & Lobianco, Antonello, 2005. "The CAP Reform Impact on the Italian Durum Wheat Production: an Application of the AG-MEMOD Model," 89th Seminar, February 2-5, 2005, Parma, Italy 232592, European Association of Agricultural Economists.
    3. Chantreuil, Frédéric & Levert, Fabrice & Hanrahan, Kevin, 2005. "The Luxembourg Agreement Reform of the CAP: an Analysis Using the AG-MEMOD Composite Model," 89th Seminar, February 2-5, 2005, Parma, Italy 232590, European Association of Agricultural Economists.
    4. Helming, John F.M. & Peerlings, Jack H.M., 2002. "The Impact of Milk Quota Abolishment on Dutch Agriculture and Economy: Applying an Agricultural Sector Model Integrated Into a Mixed Input-Output Model," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24911, European Association of Agricultural Economists.
    5. van Tongeren, Frank & van Meijl, Hans & Surry, Yves, 2001. "Global models applied to agricultural and trade policies: a review and assessment," Agricultural Economics, Blackwell, vol. 26(2), pages 149-172, November.
    6. Markus Lips & Peter Rieder, 2005. "Abolition of Raw Milk Quota in the European Union: A CGE Analysis at the Member Country Level," Journal of Agricultural Economics, Wiley Blackwell, vol. 56(1), pages 1-17, March.
    7. Lips, Markus & Rieder, Peter, 2002. "Endogenous adjusted Output Quotas - The Abolishment of the Raw Milk Quota in the European Union," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24817, European Association of Agricultural Economists.
    8. von Ledebur, Ernst-Oliver & Salamon, Petra & Weber, Gerald, 2005. "Who Is Telling the Truth? Synthetic Uniformly Structured or Econometric Country Specific Models – A Model Comparison Based on the Luxembourg Agreement," 89th Seminar, February 2-5, 2005, Parma, Italy 239281, European Association of Agricultural Economists.
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    Cited by:

    1. Salou, Thibault & van der Werf, Hayo M.G. & Levert, Fabrice & Forslund, Agneta & Hercule, Jonathan & Le Mouël, Chantal, 2017. "Could EU dairy quota removal favour some dairy production systems over others? The case of French dairy production systems," Agricultural Systems, Elsevier, vol. 153(C), pages 1-10.
    2. Fabio A. Madau & Roberto Furesi & Pietro Pulina, 2017. "Technical efficiency and total factor productivity changes in European dairy farm sectors," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 5(1), pages 1-14, December.
    3. Kempen, Markus & Witzke, Peter & Pérez Domínguez, Ignacio & Jansson, Torbjörn & Sckokai, Paolo, 2011. "Economic and environmental impacts of milk quota reform in Europe," Journal of Policy Modeling, Elsevier, vol. 33(1), pages 29-52, January.
    4. Jongeneel, Roel & Gonzalez-Martinez, Ana Rosa, 2022. "The role of market drivers in explaining the EU milk supply after the milk quota abolition," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 194-209.
    5. Harvey, David & Hubbards, Carmen & Majewski, Edward & Malak-Rawlikowska, Agata, 2013. "Impacts of Improved Animal Welfare Standards on Competitiveness of EU Animal Production," 2013 International European Forum, February 18-22, 2013, Innsbruck-Igls, Austria 164746, International European Forum on System Dynamics and Innovation in Food Networks.
    6. Mariusz Hamulczuk & Katarzyna Hertel, 2009. "Implications of the Abolition of Milk Quota System for Polish Agriculture – Simulation Results Based on the AG MEMOD Model," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 3(3), September.

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    Agricultural and Food Policy;

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