The effect of the quota policy on the cattle stock and its composition

Abstract

The effect of the milk quota policy on the cattle stock and its composition, in the Ee, is evaluated by simulation within the context of a quarterly econometric model for the European beef market. The farmers are assumed to be price-takers maximising returns from their cattle herd by deciding on its composition, by sex, and on its rate of growth through the number of total calves born. The price-taking assumption allows us to treat the milk quota policy as equivalent to general milk price reduction. Four scenarios are entertained for our simulations; in the first a 10% permanent fall in the (real) price of milk is stipulated; the second scenario assumes that the price of milk falls initially by 10%, followed by five annual 1% reductions. The third scenario assumes that the fall in the price of milk (10%) is only temporary lasting for two years, and finally the fourth simulation is based on the assumption of a 10% permanent reduction in the ‘real’ price of milk, accompanied by a 10% permanent increase of the ‘real’ price of cereals. In all cases, the cow herd declines whilst the stock of male animals expands.