Assessment of Technical and Eco-Efficiency of Dairy Farms in the Republic of Serbia: Towards the Implementation of a Circular Economy

Efforts to improve agricultural sustainability have increasingly focused on enhancing productivity while minimizing environmental impact. In the Republic of Serbia, dairy farming remains a critical sector due to its dual role in food production and environmental pressure. This study aims to evaluate the technical and eco-efficiency of dairy farms in the Republic of Serbia using FADN data and the Stochastic Frontier Analysis (SFA) method. Specifically, the SFA methodology was applied, which enables a separate assessment of time-invariant and time-variant efficiency, with the aim of clearly identifying the factors that shape milk production in the Republic of Serbia. It was found that the technical efficiency for the 2015–2023 period was at a level of 58.7%, while the eco-efficiency was estimated to be 13.1%. Observing the relationship between the estimated technical and eco-efficiency, it can be concluded that they share similar mechanisms for improvement. In both cases, time-invariant inefficiency dominated, indicating that factors under the control of farms, such as the characteristics of agricultural producers and farms, play a key role in shaping production efficiency. In this context, adopting circular economy principles, such as nutrient recycling, the use of renewable energy, and optimized input utilization, offers an additional opportunity to enhance both economic and environmental performance.