Could EU dairy quota removal favour some dairy production systems over others? The case of French dairy production systems

Since the 1st of April 2015, European dairy quotas, one of the iconic instruments of the Common Agricultural Policy, have been removed. With this removal, the European Commission expects to develop a more competitive and market-oriented dairy sector in light of increasing world food demand. In countries such as France, where quotas were administratively managed and strongly linked to land, this system maintained dairy production in all regions but also sustained inefficient dairy production systems. With quota removal, changes such as concentration of production in the most favourable areas, enlargement of dairy farms and restructuring of the dairy sector to increase the efficiency of production systems are likely. The impacts of quota removal on markets, as well as the localisation of dairy production, have been widely studied. The impacts on the distribution of dairy production across various production systems have been less studied. We use MATSIM-LUCA, a partial equilibrium economic model, to assess the impacts of dairy quota removal on i) markets and prices and ii) redistribution of production among dairy production systems in France. We consider several world demand scenarios for dairy and meat products to test the sensitivity of our results to future world demand for these products. Our results confirm the findings of previous studies, i.e., quota removal causes an increase in milk production and a decrease in raw milk prices in the European Union. Market effects are similar regardless of the world demand scenario, but they are markedly higher in the high world demand scenario. Our results regarding the impacts of quota removal on the shares of different dairy production systems in France are new and original. We find that quota removal alone has limited impacts on the redistribution of production across dairy systems. Quota removal associated with increased world demand has stronger impacts, but the expected redistribution effects towards more efficient systems remain rather limited even then. Our results show that the very intensive maize system is the most responsive to changes in the production context.