An economic analysis of the Irish milk quota exchange scheme

In Ireland, the trade of milk quota is subject to regional restrictions and a large variation in quota prices between regions has caused some controversy. This article investigates this issue by analysing the functioning of the Irish milk quota exchange market. For this purpose, the economic value of milk quota is estimated using an optimisation framework. The estimated values are then compared to milk quota prices paid at the exchange market. The analysis reveals that quota is undervalued in the border, midlands and west and south-west regions, while milk quota is overvalued in the east and south regions. This implies that farmers in certain regions overpay for additional quota, while other farmers secure good value for their quota investments. The paper concludes by discussing that the identified regional differences are only partly explained by economic and production factors.