Strategic Categorization of Dairy Cow Farms in Croatia using Cluster Analysis

Abstract

Background: 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. Objectives: The aim is to find the most representative solution that will help us define typical dairy farms and upgrade a SiTFarm tool (Slovenian Typical Farm Model), enabling us to assess the situation in Croatia comprehensively. Methods/Approach: Cluster analysis was conducted using empirical data obtained from the Croatian Agency for Agriculture and Food. The analysis involved applying both hierarchical and non-hierarchical clustering techniques. Results: Two cluster analysis scenarios are presented, differing in the variables used. In each scenario, 16 relatively homogeneous clusters of farms were obtained. Diversity was minimized within these clusters, and they effectively explain the dairy business in Croatia. Conclusions: The results of this analysis thus represent an important starting point for further analysis of the dairy sector in Croatia. These findings could help policymakers identify the types of farms that would benefit most from targeted investments to enhance efficiency, economic viability, and environmental sustainability.