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The Economics of Buying Milk Quotas in Norwegian Dairy Farming

Author

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  • Flaten, Ola

Abstract

Norwegian dairy farmers have experienced many years with cuts in their milk quotas and idle fixed resources have been utilised in less profitable activities. But in 1997 a system with regulated milk quota trade was introduced. The economics of buying milk quotas in this system is examined. The methods used are to combine gross margin and partial budgets with investment theory. Analysis on a «typefarm» indicates that it is profitable to buy additional milk quotas, even at a price of 5.50 NOK per l. But many uncertain factors (particularly the milk price) influence the profitability of buying additional milk quotas and it is important to consider the opportunity cost of the fixed resources. Thus, the profitability of buying milk quotas has to be assessed individually and there is no general answer.

Suggested Citation

  • Flaten, Ola, 1999. "The Economics of Buying Milk Quotas in Norwegian Dairy Farming," 12th Congress, Durban, South Africa, July 18-24, 1999 346531, International Farm Management Association.
    • Handle: RePEc:ags:ifma99:346531
    DOI: 10.22004/ag.econ.346531
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