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Research projects

Impact of optional future regulations of the EU milk market policy for the Austrian dairy sector


Project number: AWI/160/07

Project staff: Kirner, L.; Tribl, Ch.

Partner: Christian Rosenwirth, BMLFUW; Franz Sinabell, Wifo;

The period specified: 2007 - 2008

Project description: 

The European milk market is regulated by a milk quota system, which is limited by March 31st, 2015 for the time being. In 2004, a milk premium was introduced, which was decoupled and integrated into the single farm payments in 2007 as well, and milk quota will be expanded until 2008. Recently, the European Commission (EC) has been signalling that the milk quota system will not be continued after 2015 and is discussing a future milk market regulation these days. In 2008, the recent CAP reform will be evaluated within the scope of the ‘health check’ of the EU. For the meantime, it seems that the EU is in favour of an expansion of milk quota by about 10 %.

In this study, we analyze the impact of the CAP reform on Austrian farms with milk quota endowments as well as the impact of future milk market regulations after 2015. Possible options for any milk market regulation after 2015 are either a continuation of the milk quota system as it is now or an abolishment of the quota system. Two different mathematical programming models are used to determine the possible impacts for Austrian dairy farmers of an abolishment of the milk quota in 2015. The fi rst one is a farm optimization model, which is a modifi ed and adapted version of the model FAMOS (Schmid, 2004). The datapool used for this model is based on micro data of the Austrian FADN (Farm Accountancy Data Network) from 2000 to 2003. The second model is a linear programming model for typical farms in Austria.

Two scenarios of the development of the milk price within these political options are calculated (‘high’ and ‘low’ milk price) to cover the possible range of future outcomes. The model simulations on the basis of FADN data show that in the scenario referring to 2008 most farms are better off due to the Austrian implementation of the CAP reform compared to a pre-reform situation. Moderate average increases in total gross margins can be verified for farms in mountainous areas as well as for organic farms with only a small endowment of milk quotas. Whether farms are better off with or without a milk quota system in 2015 depends on the assumed level of the milk price. Total gross margins are, on average higher without a milk quota system under the assumption of high milk prices. More specific, smaller farms with up to 100t of milk quota are, on average, slightly better off without a quota regulation and given a high level of milk prices. For low prices, total gross margins are higher, on average, if there is a milk quota system in place. The calculations with typical farms at farm scale show that without major adaptations, the model came up with reduced gross margins for all three farms after the abolishment of the milk quota. This is mainly driven by the assumption of lower milk prices without a quota regulation. Despite this expected consequence, farm growth becomes presumably more economical as a result of lower costs for additional milk delivery rights. The study concludes that particularly two forces will infl uence the economic consequences for Austrian dairy farms after

an abolishment of the milk quota: the development of the milk price and the opportunity of farms to enlarge their milk production.

Publications

Mögliche Auswirkungen einer Aufhebung der EU-Milchquotenregelung auf die österreichische Milchwirtschaft. Agrarpolitischer Arbeitsbehelf Nr. 27 der Bundesanstalt für Agrarwirtschaft  >