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Explaining Variations in the Price of Dairy Quota: Flow Returns, Liquidity, Quota Characteristics, and Policy Risk

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  • Wilson, Norbert L.W.
  • Sumner, Daniel A.

Abstract

An econometric model based on the net present value model is used to examine factors that drive the variation of California dairy quota values over a 29-year period. The results suggest the price of quota is based on expected returns, variations in quota owner liquidity, and the risk of policy default. The dominant influence on the variation of the quota price was the historical variation in monthly flow of net benefits from owning quota. This analysis confirms that the rate of return to quota rises in periods of policy uncertainty.

Suggested Citation

  • Wilson, Norbert L.W. & Sumner, Daniel A., 2004. "Explaining Variations in the Price of Dairy Quota: Flow Returns, Liquidity, Quota Characteristics, and Policy Risk," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(1), pages 1-16, April.
    • Handle: RePEc:ags:jlaare:31145
    DOI: 10.22004/ag.econ.31145
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    References listed on IDEAS

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    Cited by:

    1. Daniel A. Sumner & Norbert L. W. Wilson, 2005. "Capitalization of Farm Policy Benefits and the Rate of Return to Policy-Created Assets: Evidence from California Dairy Quota," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 27(2), pages 245-258.
    2. Richard G. Newell & Kerry L. Papps & James N. Sanchirico, 2007. "Asset Pricing in Created Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(2), pages 259-272.
    3. Sanchirico, James & Newell, Richard & Papps, Kerry, 2005. "Asset Pricing in Created Markets for Fishing Quotas," RFF Working Paper Series dp-05-46, Resources for the Future.
    4. repec:ags:aaea16:236373 is not listed on IDEAS
    5. Rimsaite, Renata & Fisher-Vanden, Karen A. & Olmstead, Sheila M., 2016. "Price Efficiency in U.S. Water Rights Markets," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 243124, Agricultural and Applied Economics Association.
    6. Blandford, David & Boisvert, Richard N., 2004. "U.S. Policy for Agricultural Adjustment," IAPRAP\IATRC Summer Symposium, Adjusting to Domestic and International Agricultural Reform in Industrial Countries, June 6-7, 2004, Philadelphia, PA, 15771, International Agricultural Policy Reform and Adjustment Project (IAPRAP).
    7. Rozowski, Casey & Vukina, Tomislav, . "Production Quotas, Competition and Farm Values: A Chronicle of the Swine Industry in North Carolina," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 49(2).
    8. Lotte Yanore & Jaap Sok & Alfons Oude Lansink, 2024. "Do Dutch farmers invest in expansion despite increased policy uncertainty? A participatory Bayesian network approach," Agribusiness, John Wiley & Sons, Ltd., vol. 40(1), pages 93-115, January.

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