Economic and environmental consequences of technical and institutional change in Dutch dairy farming

Abstract

A linear programming model of a dairy farm was used to explore the future for different types of Dutch dairy farms under different scenarios. The scenarios are consistent sets of changing factors that are considered external at farm level. The factors included are technical, such as efficiency of milk production and feed production, or institutional, such as national environmental legislation and EU market and price policy. Income and nutrient losses for farms differing in intensity and size are generated for the base year 1992 and for the year 2005. The results show that technical change up to the year 2005 has a positive influence on labour income as well as on nutrient losses. The increase of labour income is higher for farms with a higher total milk production in the basis situation. The influence of environmental policy on labour income and environmental results is bigger for farms with a higher intensity, as these farms have to take more measures to comply with governmental policy. Replacement of the price support policy for milk by a 2-price system with a high price for a restricted amount of milk and a low price for an unrestricted amount of milk has negative consequences for labour income, especially for intensive farms.