BIM55310 | Farming quotas: creation of quotas

Quotas come into being when the regulatory system of which they are part is introduced. Normally a total quota for the UK is subdivided among existing producers according to their level of production at a certain date. A pool of reserve quotas may also be created and held centrally for allocation to special cases such as new entrants. Each eligible producer thus receives an initial allocation of quotas without payment. The quota is immediately of value to farmers because it enables them to carry on the particular farming activity more profitably than they would be able to without a quota. One effect of the introduction of a quota system is therefore the creation of a new capital asset in the hands of farmers.