agriculture Article Factors Influencing Technical Efficiency in the EU Dairy Farms Zde ˇ nka Náglová 1 and Tamara Rudinskaya 2, *   Citation: Náglová, Z.; Rudinskaya, T. Factors Influencing Technical Efficiency in the EU Dairy Farms. Agriculture 2021, 11, 1114. https:// doi.org/10.3390/agriculture11111114 Academic Editor: Giuseppe Timpanaro Received: 18 October 2021 Accepted: 7 November 2021 Published: 9 November 2021 Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affil- iations. Copyright: © 2021 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/). 1 Department of Economics of Food Industry and Agriculture, Institute of Agricultural Economics and Information, Mánesova 1453/75, 130 00 Prague, Czech Republic; naglova.zdenka@uzei.cz 2 Department of Agricultural Commodities, Institute of Agricultural Economics and Information, Mánesova 1453/75, 130 00 Prague, Czech Republic * Correspondence: rudinskaya.tamara@uzei.cz; Tel.: +420-222-000-421 Abstract: This paper aims to analyse the technical efficiency (TE) of dairy farms and find its deter- minants. To accomplish this problem, the Stochastic Frontier Analysis was applied. The data were obtained from the Farm Accountancy Data Network database for dairy farms (TF15-45—Specialist dairying) for 2004–2019. Dairy farms were divided into four clusters according to their physical size (number of livestock units per farm) and economic size (standard output per farm). The largest farms by physical and economic size are located in Denmark and Cyprus. The smallest, in comparison, are in Bulgaria, Croatia, Latvia, Lithuania, Austria, Poland, Romania, and Slovenia. Farms in the EU are relatively technically efficient, i.e., they use their resources efficiently to produce maximum output (production). However, they have the potential to achieve better economic results and be more competitive, as the size of farms’ is not fully optimised. The abolition of the milk quota can be considered a factor in improving technical efficiency, as the indicator is higher after the abolition. New and old member states have almost comparable technical efficiency levels (the p-value of the t-test is 0.463), with old members having slightly higher level TE. Subsidies have contradictory effects on TE. Farm efficiency with higher subsidies per cow is higher for farms with €51–100/cow. However, as subsidies increase, TE decreases. Only the group of farms with the highest subsidies has a higher TE. More diversified farms are more technically efficient than specialised farms. Milk yield did not influence the analysed indicator. The analysis results can serve the stakeholders as a tool for modelling future agricultural policy, as the European farms are very heterogenous and show different conditions and economic outcomes. Keywords: subsidies; farm size; milk; cluster analysis; stochastic frontier analysis; European Union 1. Introduction The dairy sector is associated with a particular degree of uncertainty. In livestock, diseases in animal husbandry, perishability of the product, product prices and feed prices play a role and influence productivity positively and negatively [1]. The dairy sector is affected by structural changes, including the geographical relocation of milk production or the introduction of an intensive production system. These changes may affect farm efficiency, farm profitability, or the sector’s sustainability in traditional milk-producing areas [2]. EU milk production is important in a global context. EU countries are the second- largest milk producers in the world (after India). The EU is also one of the largest milk exporters, together with New Zealand and the United States. In 2020, milk production in the EU increased. The largest importer is China. In the following years, EU production is expected to grow, but at a slower rate than the global average; the herd is expected to decrease but milk yields are expected to increase. The dairy sector has been relatively stable during the pandemic, but some structural changes may have long-term implications [3]. The role of competitiveness in the dairy market has become significant. The main EU milk production countries are Germany, France, the Netherlands, Poland, and Italy, that account for more than 66% of the total EU milk production in 2019 [4]. Agriculture 2021, 11, 1114. https://doi.org/10.3390/agriculture11111114 https://www.mdpi.com/journal/agriculture