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The primary objective of present study was the creation of a macroeconomic (simultaneous equation) model of Estonian dairy sector. Simultaneous equation modelling provides a new approach to economic analysis. Using the approach pioneered by FAPRI, a macroeconomic model of Estonian dairy sector has been created. The FAPRI is a dynamic, partial equilibrium, global econometric model. This paper outlines the linkage between dairy sector and input sectors. The stochastic equations are estimated by two stage least squares (2SLS). The equations were estimated using data from 1993 to 2005 inclusive. Most of the parameters of all structural equations have theoretically consistent signs and are significant. Projections of the main endogenous variables are made for a five-year period. Example equations are illustrative. Some results from the simulation of the model are presented. The projections include impact of the milk quota proposals on number of dairy cows and on total milk production in Estonia. The results are analysed. Perspective implementation of Estonian dairy sector model is considered. The experimental econometric dairy model of the Estonian agriculture may be used for projection and analysis purposes.