Competitiveness of milk production in Serbia

In the paper is analyzed competitiveness of Serbian family dairy farms in lowland region in 2007, with some aspects of possible perspectives. Globalization process, expected EU integrations and set of free trade agreements will expose Serbian farms in close future to higher level of competition. Identified structural changes, refers on dairy farms concentration and specialization in lowland region in recent years. Estimated model of cost function revealed that family farms with bigger herd size have lower average costs of milk production. Analysis of data collected in sample of 24 dairy farms, proofs positive and strong correlation relationship between lower costs and economic efficiency. Family dairy farms which are more efficient they are also more profitable. Milk price volatility in period 2007 to 2009 hurts all farms, but the most farms with higher average costs, which are usually inefficient dairy farms.