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Free Content Economic Consequences of Milk Quota Purchase and Renting of Milk Quota on Farm Level

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Abstract:

Dairy farmers with combined milk and beef production face complex decisions regarding optimum milk yield, slaughter age for bulls, calving age for heifers, disposal of farm land etc. The linear programming model TINE Optimal was developed to assist farmers in the decision making process. Application of the model on two case farms demonstrates that farmers with a moderate milk yield per cow can increase their profitability significantly by increasing milk delivery. Such farms have a high production potential which can be utilized when the quota program is abolished. However, this development will reduce inland beef production, requiring national initiatives to maintain self sufficiency. It is also demonstrated, the effect of increased milk delivery on profitability depends on farm conditions. Before increasing milk delivery, farmers should carefully identify possible bottlenecks in their production system, and the effects on heifer breeding and beef production should be taken into account. Comparing quota purchase and renting of quota demonstrates that renting of quota is more profitable at the current price level.

Keywords: Dairy; Linear Programming; Profitability; Rent of Milk Quota

Document Type: Regular Paper

Publication date: November 1, 2009

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