Land use response to agricultural policy and market movement on Finnish dairy-farms

Authors

• J.K. NIEMI
• K. PIETOLA

DOI: https://doi.org/10.23986/afsci.5703

Abstract

MTT Agrifood Research Finland, Economic Research, PO Box 3, FIN-00411 Helsinki, Finland, e-mail: [e-mail] This study estimates an econometric model for land allocation on Finnish dairy-farms in 1989-1997. Land allocation equations are estimated jointly with the demand of purchased feeds and the supply for milk. The model is used to test how agricultural policy reforms have changed land allocation, animal feeding, and the supply for milk on Finnish dairy-farms. The results suggest that land allocations respond inelastically to the changes in income subsidies paid through the land areas. The use of feed concentrates in milk cows' diet has increased mainly because feed concentrate prices have decreased, rather than through the effects of acreage-based income subsidies on land allocations. At the same time, feed grain production has decreased. Farm size has an important effect on dairy-farm land use. Farmers, who have expanded milk production, have specialised in roughage production. The diet of cows has been intensified by purchasing more feed concentrates. The results also suggest that tradable milk quotas have allowed for a significant re-allocation of milk output between farms. The milk output turned out to be endogenous over the period of tradable milk quotas (1994-1997).;