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© 1987 Oxford University Press and the Foundation for the European Review of Agricultural Economics

other

The ratio of fat value to non-fat value of milk: An econometric model of effects of intervention price changes in the EC

J.D. LANDHEER*

Royal Netherlands Dairy Federation FNZ Rijswijk, Netherlands

Received January 1, 1987;

Summary

In discussions on EC dairy policy, the ratio between the value of the butter-fat and that of the non-fat milk components, which is connected with the intervention prices of butter and skimmed milk powder, is referred to repeatedly. Changes in the ‘fat/non-fat ratio’ are reflected in the milk price paid to the producer as well as in prices for all dairy products. Therefore they influence not only intervention prices but also commercial sales and the amount paid out in refunds and subsidies by the EC. In this article, a simple model has been developed which enables all these effects to be quantified. The final conclusion is that, in the current situation, neither the producer nor the EC has anything to gain from a change in the ‘fat/non-fat ratio’.


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