implications of the abolition of milk quota system for polish agriculture – simulation results based on the ag memod model

The objective of the study was to asses the economics effects of the dairy policy reform sanctioned by CAP Health Check on the agricultural market in Poland. The paper presents a theoretical study of the production control program as well as a model based quantitative analysis of the implications of the reform on the agricultural markets. The partial equilibrium model AGMEMOD was used for simulation. The results obtained indicate that the expansion and subsequently the elimination of milk quota system lead to the growth of milk production and consumption in Poland which confirms the hypothesis derived from theoretical study. As a consequence, the growth of the production of most of dairy products and the decrease of their prices is expected. As the growth of dairy consumption is smaller than the growth of milk production the increase of self-sufficiency in the dairy market is predicted. The comparison of the scale of price adjustment resulting from the dairy reform to the market price changes observed recently leads to the conclusion that global market factors will probably be more important for the future development of milk production and prices in Poland than the milk quota abolition. Nevertheless, the reform constitutes a significant change in business conditions for producers and consumers of milk and dairy products. As a consequence, milk production will become more market based, as far as market prices, production costs and milk yields are concerned. Simulation results from the AGMEMOD model confirm the opinion brought by other authors that the abolition of milk quotas will lead to the decline of dairy farmer income. The main beneficiaries of the reform would become the consumers who could take advantage of the decline in prices of the dairy products.