EU Dairy after the Quota Abolition: Inelastic Asymmetric Price Responsiveness and Adverse Milk Supply during Crisis Time

Roel Jongeneel and Ana Gonzalez-Martinez ()
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Roel Jongeneel: Department of Social Sciences, Wageningen University and Research, 6700 EW Wageningen, The Netherlands
Ana Gonzalez-Martinez: Wageningen Economic Research, 2595 BM Den Haag, The Netherlands

Agriculture, 2022, vol. 12, issue 12, 1-16

Abstract: The abolition of the milk quota system in April 2015 has implied a transition towards a new “system” in which non-policy and non-EU elements have become important drivers of the EU dairy market. In terms of its contribution, after reviewing some of the existing literature, this article presents a theoretical framework to understand “irregular” supply behaviour, while it empirically identifies an “inverse” supply curve for the EU dairy sector. In doing so, milk prices have been decomposed by following the procedure proposed by James P. Houck. This exercise confirms the non-reversibility, and therefore an asymmetric response, in the behaviour of milk supply for most EU Member States. Moreover, this article also presents the results of a “stress” test of the dairy sector in order to analyse the responses of dairy production in a context of the asymmetrical behaviour of dairy farmers and assess the competitiveness of the dairy sector at Member State level. The outcomes emphasise the high competitiveness of the Irish dairy sector and suggest a deterioration of the competitiveness in the case of the United Kingdom and France. From the policy-making perspective, the identification of this type of farmer’s reactions is key for an appropriate design of policy interventions and crisis management strategies.

Keywords: price asymmetry; agricultural commodities; price decomposition; dairy production; EU28 (search for similar items in EconPapers)
JEL-codes: Q1 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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