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ECONOMIC EFFECTS OF THE ABOLITION OF MILK QUOTA SYSTEM IN THE EUROPEAN UNION - SIMULATION RESULTS BASED ON THE AGMEMOD MODEL (Ekonomiczne skutki likwidacji kwot mlecznych w Unii Europejskiej - wyniki symulacji z wykorzystaniem modelu AGMEMOD)

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Hamulczuk M., Stanko S.

Zagadnienia Ekonomiki Rolnej

2009

issue 4(321)

3-20

The paper provides an analysis of the implications of dairy policy reform on the agricultural market in the EU and in individual Member States. Both a theoretical study of the production control programme and model-based quantitative simulation of the effects of milk quota system abolition are presented in the paper. The results obtained in empirical analysis indicate that gradual expansion of milk quotas and elimination thereof in the end lead to market conditions changes which affect farmer's decisions and regional distribution of production in the EU. According to simulation results, EU milk production would increase by 4.8% causing a decrease of milk prices by around 7% as a result of milk quota abolition. The relatively slight scale of these changes leads to the conclusion that external factors concerning world situation are more important for the future EU milk market development than the changes in the milk quota system. Consumers are the main beneficiaries of the reform. They would benefit from declining prices of dairy products. According to the CAPRI model simulations, overall loss of agricultural incomes in the EU due to milk quota abolition could total 2.0%, including losses of dairy farmers' incomes - 5.8%.

IMPLICATIONS OF THE ABOLITION OF THE MILK QUOTA SYSTEM FOR POLISH AGRICULTURE - SIMULATION RESULTS BASED (Implikacje likwidacji kwot mlecznych dla polskiego rolnictwa - wyniki symulacji z wykorzystaniem modelu AGMEMOD)

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Hamulczuk M., Hertel K.

Contemporary Economics

2009

issue 3(11)

5-23

The objective of the study was to assess the economics effects of the dairy policy reform sanctioned by CAP Health Check on the agricultural market in Poland. The paper presents a theoretical study of the production control program as well as a model based quantitative analysis of the implications of the reform on the agricultural markets. The partial equilibrium model AGMEMOD was used for simulation. The results obtained indicate that the expansion and subsequently the elimination of milk quota system lead to the growth of milk production and consumption in Poland which confirms the hypothesis derived from theoretical study. As a consequence, the growth of the production of most of dairy products and the decrease of their prices is expected. As the growth of dairy consumption is smaller than the growth of milk production the increase of self-sufficiency in the dairy market is predicted. The comparison of the scale of price adjustment resulting from the dairy reform to the market price changes observed recently leads to the conclusion that global market factors will probably be more important for the future development of milk production and prices in Poland than the milk quota abolition. Nevertheless, the reform constitutes a significant change in business conditions for producers and consumers of milk and dairy products. As a consequence, milk production will become more market based, as far as market prices, production costs and milk yields are concerned. Simulation results from the AGMEMOD model confirm the opinion brought by other authors that the abolition of milk quotas will lead to the decline of dairy farmer income. The main beneficiaries of the reform would become the consumers who could take advantage of the decline in prices of the dairy products.

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1 Contemporary Economics

1 Zagadnienia Ekonomiki Rolnej

2 2009

2 Hamulczuk M.

1 Hertel K.

1 Stanko S.

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ECONOMIC EFFECTS OF THE ABOLITION OF MILK QUOTA SYSTEM IN THE EUROPEAN UNION - SIMULATION RESULTS BASED ON THE AGMEMOD MODEL (Ekonomiczne skutki likwidacji kwot mlecznych w Unii Europejskiej - wyniki symulacji z wykorzystaniem modelu AGMEMOD)

IMPLICATIONS OF THE ABOLITION OF THE MILK QUOTA SYSTEM FOR POLISH AGRICULTURE - SIMULATION RESULTS BASED (Implikacje likwidacji kwot mlecznych dla polskiego rolnictwa - wyniki symulacji z wykorzystaniem modelu AGMEMOD)