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The milk processing sector in the Republic of Croatia faces numerous challenges. It is a distinctly bipolar structure, with some entities resembling the largest milk producers in the EU, while many small and medium-sized dairy farms struggle to remain competitive and achieve further progress. To formulate effective policy, it is important to differentiate between these types and address their key challenges.

Achieving economic and social sustainability is the goal of any policy when defining measures. We focus on the beef sector, where many challenges have arisen due to its structural characteristics, such as an unfavourable scale structure, high costs, low efficiency, and a low environmental footprint. This paper presents an example of the support provided by a mathematical programming model in the development of a Common Agricultural Policy Strategic Plan for the period 2023-2027.

Background: Farm-level models have become an important tool for agricultural economists as there is a growing demand for microsimulation and analysis of farms at the individual level.

This study investigates the dairy sector in Slovenia, focusing on farm heterogeneity, efficiency in resource utilization, and policy implementations. Through a modeling approach, we explore the differences among dairy farms, considering factors such as herd size, farm management, natural conditions, and production potential. Based on 32 typical dairy farms, representing the entire dairy sector, composed of 6400 dairy farms, the analysis was performed using the farm model (SiTFarm). We emphasize the importance of accurate assessments, given the variability of policy impacts across farm types. While medium-to-large, specialized farms dominate milk production, smaller farms, particularly in less favored areas, hold social and environmental importance despite facing competitive challenges. Addressing environmental sustainability could involve promoting practices that improve milk yield and include grazing, as this tends to lower greenhouse gas emissions per kilogram of milk (−5%). Dairy farms contribute about one-third of the generated revenue in Slovene agriculture, of which a good half goes to farms located in less favored areas. They manage a good quarter of permanent grassland in Slovenia, and it is certainly the sector that can achieve the highest return on these areas. In 75% of the farms, the gross margin is higher than 1756 EUR/ha and using best practices they exceed 3400 EUR/ha. The model results indicate that the average hourly rate on dairy farms during the observed period falls within the range of EUR 7.3 to 17.4 of gross margin for most farms, with the top-performing ones exceeding 24 EUR/h. However, due to the significant reliance on budgetary payments (on average, 58% of the gross margin), the implementation of the common agricultural policy strategic plan generally leads to a deterioration in the economic indicators of dairy farms. This impact is particularly pronounced on medium-sized and larger farms, increasing the effect on income due to the substantial fixed costs involved. Our findings underscore the interplay between policy interventions, farm characteristics, and sectoral outcomes, offering valuable insights for policy-makers and stakeholders. [ABSTRACT FROM AUTHOR]

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