This paper attempts to identify factors which influence the effectiveness of milk production. The basic aim is to compare levels of costs in the dairy industry between Czech and European producers. The average cost per 100 kg ECM milk is determined from data provided by the European Dairy Farmers association (EDF). The total costs per 1 litre of Czech milk producers are on the European average level with high production efficiency. The problem is only in the utilisation of basic production factors, especially land and labour.