The long-term elasticity of the milk supply with respect to the milk price in the Netherlands in the period 1969-1984

This paper deals with the calculation of the long-term elasticity of the milk supply with respect to the milk price in The Netherlands during the period 1969-1984. Because the individual farmer decides upon (changes in) this supply, the paper considers the underlying decision process at the farm as an obvious point of departure. For this farm it formulates a dynamic, alpha-numerically specified model of supply. From this model the paper derives decision rules for the optimal level of the (des)investments in the dairy cow stock. The resulting reaction equations specify these levels as a function of, among other things, present and expected prices. So these relations provide a starting point for e.g. the estimation of this long-run elasticity.