Go to main content
Did you know? By making a gift to AgEcon Search, you are helping ensure that our small non-profit continues to provide free full-text access to 15,000 visitors a day from 170+ countries
Format
BibTeX
MARCXML
TextMARC
MARC
DublinCore
EndNote
NLM
RefWorks
RIS

Files

Abstract

The system of supply management in the Canadian dairy sector requires that farmers acquire quota to produce milk. In Canada's largest dairy producing province, Quebec, a ceiling on the price of quotas has been in effect since 2007. Previous research established that the use of quota price ceilings create a new source of inefficiency in the Canadian dairy sector. An alternative method for lowering quota prices is to lower the rent from quotas through lowering the farm price of milk. I determine the magnitude of the decrease in the farm price of milk that would be required to reduce the valuation of Quebec dairy quotas to the current price ceiling of $25,000 per unit. Accomplishing this task requires modeling the implicit valuation of quotas during the price ceiling era. Starting from a dynamic model of the demand for quotas, I develop an econometric model to estimate producers' discount factor. Using my econometric results and the modeled equilibrium price, I estimate the price of dairy quotas over the period 1993-2010. In 2010, I estimate that dairy quotas in Quebec would have traded at a price of $31,955 in the absence of the price ceiling. My results indicate that lowering the valuation of quotas to $25,000 per unit would have required an 11.83% reduction in the farm price of milk.

Details

PDF

Statistics

from
to
Export
Download Full History